Journal of Finance Vol. 70 No. 3 2015
Anchoring on Credit Spreads
Abstract
This paper documents that the path of credit spreads since a firm's last loan influences the level at which it can currently borrow. If spreads have moved in the firm's favor (i.e., declined), it is charged a higher interest rate than is justified by current fundamentals, whereas if spreads have moved to the firm's detriment, it is charged a lower rate. We evaluate several possible explanations for this finding, and conclude that anchoring to past deal terms is most plausible.
- DOI
- 10.1111/jofi.12248
- Volume
- 70
- Issue
- 3
- Pages
- 1039-1080
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref