This study investigates the relationships between bank activism and target firms’ debtholder value, shareholder value, and firm performance. We find that bank activists are more likely to target firms with heavier syndicated loan borrowing and lower credit quality than other shareholder activists. Bank activism events are associated with significantly positive abnormal bond returns, and this effect only exists in the subset of observations where bank shareholder activists possess a loan stake in the target firm. The target firms of bank activism exhibit a significant improvement in credit quality, coupled with decreases in syndicated loan interest rate spreads, crash risk, and CEO risk-taking incentives.

In this study, we show that a firm's use of special purpose entities (SPEs) is associated with unfavorable loan contract terms, including higher loan rates, collateral requirements, and restrictive covenants. Further analyses suggest that the association between the use of SPEs and unfavorable loan contract terms is primarily due to the increase in the information risk faced by lenders, as firm managers can easily use SPEs to manipulate earnings and hide losses. Specifically, we find that the use of SPEs has a more pronounced effect on increasing the cost of loans and causing more stringent non-price loan terms when managers have a stronger incentive to manipulate earnings and when banks have less knowledge about the SPE sponsor firms due to the lack of prior lending relationship. In addition, we find that the use of SPEs is associated with a greater likelihood of accounting restatements and greater information asymmetry between inside managers and outside capital suppliers.

A large number of newly listed firms have significant involvement in international business activity. In this paper, we examine the effect of international business activity on the pricing of initial public offerings (IPOs), post-IPO performance, and survival. In a large sample of U.S. IPOs over 1981–2012, we find that firms with exports and/or foreign sales prior to going public have significantly lower underpricing than firms without international business activity. Furthermore, firms with international business activity significantly outperform purely domestic IPO firms over 3- and 5-year periods after going public and have a significantly higher survival rate. Overall, we provide strong evidence that global diversification has an economically significant effect on the valuation and subsequent performance of firms going public.