This paper investigates the impact of a tax haven crackdown on the loan sale market, where uninformed institutional investors face significant information risk. Using the adoption of Tax Information Exchange Agreements (TIEAs) as a natural experiment, we find that TIEA adoption leads to an increased probability and intensity of loan sales for borrowing firms with subsidiaries in affected tax havens. This rise in loan demand is not accompanied by significant changes in the primary loan or credit default swap (CDS) markets, aligning with TIEAs’ primary goal of mitigating information risk rather than credit risk. Further, the increase in loan demand manifests in tax havens that are less transparent and that have stronger regulatory enforcement. The effect is also more pronounced for borrowing firms with more complex haven structures, a higher proportion of leveraged loans, and a higher probability in engaging tax avoidance.

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