We show that lenders make price concessions for the right to resell loans and reveal a strong countervailing association between the ex ante probability of loan resale and the initial loan spreads. We disentangle the side effects (reduced monitoring) from the benefits (enhanced liquidity) brought by the secondary loan resales. The average net impact of simultaneously reducing the probability of the presence of resale constraint and raising the probability of resale across the full sample is to lower spreads by 14 basis points. On balance, the secondary loan market provides clear benefits to the issuers of debt.

Losing Sleep at the Market: The Daylight Saving Anomaly: Reply by Mark J. Kamstra, Lisa A. Kramer and Maurice D. Levi. Published in volume 92, issue 4, pages 1257-1263 of American Economic Review, September 2002