Corporate commercial paper, note issuance facilities, and shareholder wealth

Myron B. Slovin, Marie Sushka, Carl D. Hudson

Research output: Contribution to journalArticlepeer-review

29 Scopus citations


In this paper, we hypothesize that the financial market regards the issuance of securities through a note issuance facility or a commercial paper program backed by a standby letter of credit as a favorable signal about the issuing firm. This is due to the certification role played by banks. We demonstrate that announcements of commercial paper programs backed by these formal backstop facilities have a statistically significant positive effect on shareholder wealth. This result is in contrast to issues of other types of securities studied in the literature which have been shown to induce nonpositive effects on shareholder wealth. The initiation of commercial paper programs without this backing has little effect on shareholder wealth. Finally, we demonstrate that the quality of the credit ratings associated with these issues of commercial paper has little effect on abnormal returns. Thus, our results cannot be explained by the pattern of these ratings.

Original languageEnglish (US)
Pages (from-to)289-302
Number of pages14
JournalJournal of International Money and Finance
Issue number3
StatePublished - Sep 1988

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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