Date: 30 January 2026, Friday
Time: 13.30 – 14.30
Place: MA-330
“Breaching the Chinese Wall: Cross-Market Information Flow Following Financial Institution Mergers”
by
Ehsan Mahdikhani
Stockholm School of Economics
Abstract
How does access to private loan information affect institutional investors’ equity returns? Exploiting mergers between asset managers and lenders as a plausibly exogenous shock to loan-side information access, we find that after gaining access institutional investors earn higher abnormal equity returns: within institutions, managers earn 3.1 pp higher annualized returns on stocks for which they have loan-side access than on their other holdings without such access, and across institutions trading the same stock, informed managers outperform equity-only peers by 1.7 pp annualized, consistent with debt positions conferring information unavailable to pure shareholders. Mechanism tests show larger gains when financial-reporting covenants bind; where such covenants exist pre-merger, returns rise by roughly 2 pp.
Firms with dual holders adjust: public voluntary disclosures decline by about 11%, new facilities are 11–17% more likely to include information-intensive covenants, and loan pricing improves. Public markets respond with wider bid–ask spreads. By comparing holdings with loan-side access to managers’ other positions and to uninformed holders of the same stock, the design isolates causal loan-to-equity information flow, linking mergers between equity- and lending-side entities to trading rents and to shifts in the public information environment.
Bio
Ehsan Mahdikhani is a Ph.D. candidate in Finance at the Swedish House of Finance, Stockholm School of Economics. His research focuses on empirical corporate finance, private equity, and entrepreneurial finance, with an emphasis on information frictions, cross-market information flows, and financial institution mergers. He also studies venture capital incentives, industry allocation, and firm innovation using both reduced-form empirical methods and structural modeling. His research has been presented at leading international conferences and workshops and has received several academic awards.