Commitment-based financing by banks boosts stock prices for undervalued companies.
Banks play a special role in lending money to companies, especially when they need funds quickly or when interest rates are high. This type of lending is crucial for both small and large companies. During the Asian crisis in 1998, many companies turned to banks for loans when the market was undervaluing them. When companies announce these loans, their stock prices tend to go up, showing that investors see it as a positive sign.