Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5085270 | International Review of Financial Analysis | 2008 | 16 Pages |
Abstract
We examine the stock price reaction to announcements of privately placed debt. The results suggest no effect for firms with a public debt rating and offsetting effects for firms without a public debt rating. If the private placement appears to reduce monitoring for a firm without a debt rating, it produces a significantly negative price response. However, if it appears to increase financial flexibility and bargaining power, it produces a positive reaction. Overall, the evidence suggests that private placements of debt are more similar to public bond issues than bank loans in terms of the price reaction at the announcement.
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Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Steven A. Dennis, Weili Lu,