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Title: Analyzing Wealth Effects for Bondholders

Analyzing Wealth Effects for Bondholders

New Insight on Major Corporate Events from the Debtholders’ Perspective

by Daniel Maul (Author)
©2016 Thesis XXIV, 183 Pages
Law, Economics & Management
Series: Corporate Finance and Governance, Volume 20

Summary

Despite the growing importance of funds through corporate bonds, most investigations on the short-term effects of certain events on firm value are only conducted for stocks. Thus, research provides an incomplete view on how firm value is truly affected. The author fills this gap and focuses his research on corporate debt. The first section of the book provides a comprehensive overview of existing methodologies to calculate abnormal bond returns. Subsequently, two frameworks are selected to investigate the importance of corporate debt when empirically assessing major corporate events: Synergy disclosure at M&A announcements and debt offerings through reopenings. Both provide evidence for the necessity to regard corporate debt to fully assess changes in firm value.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author(s)/editor(s)
  • About the book
  • This eBook can be cited
  • Geleitwort
  • Acknowledgements
  • Overview
  • Table of Contents
  • List of Tables
  • List of Figures
  • List of Abbreviations
  • 1. Introduction
  • 1.1 The Importance and Economic Relevance of Corporate Bonds
  • 1.2 Thesis Structure
  • 2. Review of Event Study Procedures to detect Wealth Effects in Bondholder Research
  • 2.1 Bond Characteristics affecting Event Study Methodology
  • 2.1.1 Illiquidity of Bond Price Data
  • 2.1.2 Multiple Bonds Outstanding per Company
  • 2.2 Bond Event Study Methodology
  • 2.2.1 Market Model
  • 2.2.2 Multi-Factor Models
  • 2.2.3 Valuation Prediction Error
  • 2.2.4 Mean Adjusted Model
  • 2.2.5 Matching Portfolio Model
  • 2.3 Test Statistics
  • 2.4 Data and Data Sources
  • 2.5 The Link between Bondholder and Stockholder Returns
  • 2.6 Summary and Conclusion
  • 3. Wealth Effects of Synergy disclosing M&A Announcements in the US Energy Sector
  • 3.1 Literature Review
  • 3.1.1 Voluntary Synergy Disclosure and Shareholder Wealth Effects
  • 3.1.2 Bondholder Wealth Effects associated with M&A
  • 3.2 Data and Methodology
  • 3.2.1 Data
  • 3.2.2 Calculation of Abnormal Bond Returns
  • 3.2.3 Calculation of Abnormal Stock Returns
  • 3.3 Empirical Results
  • 3.3.1 Bond Event Study
  • 3.3.2 Stock Event Study
  • 3.3.3 Cross Sectional Regression Analysis of Synergy Communication
  • 3.3.4 Analysis of the Transfer of Wealth between Bondholders and Stockholders
  • 3.4 Summary and Conclusion
  • 4. Wealth Effects of Corporate Bond Reopenings
  • 4.1 Related Research
  • 4.2 Data and Methodology
  • 4.2.1 Data and Descriptive Statistics
  • 4.2.2 Methodology
  • 4.3 Empirical Results
  • 4.3.1 Bond Event Study
  • 4.3.2 Stock Event Study
  • 4.3.3 Cross Sectional Regression Analysis
  • 4.3.4 Potential Endogeneity
  • 4.3.5 Wealth Transfer of Different Debt Offering Types
  • 4.3.6 Window of Opportunity Framework
  • 4.4 Summary and Conclusion
  • 5. Concluding Remarks
  • 5.1 Summary and Discussion of the Main Results
  • 5.2 Limitations and Avenues for Future Research
  • 6. Reference List

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List of Tables

Table 2-1: Prior Event Study Research with Corporate Bond Data

Table 3-1: Number of M&A deals by year of announcement

Table 3-2: Descriptive Statistic for Sample Bidding Firms

Table 3-3: Distribution of the number of portfolio bonds for the event day [0;0]

Table 3-4: Bidder’s Abnormal Bond Returns and Univariate Comparison for the “Complete Sample” (Bond Level Approach)

Table 3-5: Bidder’s Abnormal Bond Returns and Univariate Comparison for the “Control Sample” (Bond Level Approach)

Table 3-6: Bidder’s Abnormal Bond Returns and Univariate Comparison for the “Complete Sample” (Firm Level Approach)

Table 3-7: Bidder’s Abnormal Bond Returns and Univariate Comparison for the “Control Sample” (Firm Level Approach)

Table 3-8: Bidder’s Abnormal Stock Returns and Univariate Comparison for the “Complete Sample” (Market Model)

Table 3-9: Bidder’s Abnormal Stock Returns and Univariate Comparison for the “Control Sample” (Market Model)

Table 3-10: Bidder’s Abnormal Stock Returns and Univariate Comparison for the “Complete Sample” (Four-Factor Model)

Table 3-11: Bidder’s Abnormal Stock Returns and Univariate Comparison for the “Control Sample” (Four-Factor Model)

Table 3-12: Cross Sectional Regression Analysis of Synergy Disclosure on Bidder Stock Returns for the “Complete Sample” ← XV | XVI →

Table 3-13: Cross Sectional Regression Analysis of Synergy Disclosure on Bidder Stock Returns for the “Control Sample”

Table 3-14: Pearson Correlation between Abnormal Change in the Market Value of Equity and Debt (Yearly Data)

Table 3-15: Pearson Correlation between Abnormal Change in the Market Value of Equity and Debt (Daily Data)

Table 3-16: Cross Sectional Regression Analysis of Wealth Transfer between Bidders’ Market Value of Equity and Market Value of Debt for the “Complete Sample” (Yearly Data)

Table 3-17: Cross Sectional Regression Analysis of Wealth Transfer between Bidders’ Market Value of Equity and Market Value of Debt for the “Control Sample” (Yearly Data)

Table 3-18: Cross Sectional Regression Analysis of Wealth Transfer between Bidders’ Market Value of Equity and Market Value of Debt for the “Complete Sample” (Daily Data)

Table 3-19: Cross Sectional Regression Analysis of Wealth Transfer between Bidders’ Market Value of Equity and Market Value of Debt for the “Control Sample” (Daily Data)

Table 4-1: Number of Debt Offerings by Issue Year

Table 4-2: Results of Papers examining Debt Offering Announcements

Table 4-3: Number of Regular Issues and Reopenings by Industry and Country

Table 4-4: Number and Average Principal Amount of Regular Issues and Reopenings by year

Table 4-5: Calendar Days between Regular Bond Issue and Corresponding Reopening(s)

Table 4-6: Distribution of the number of portfolio bonds for the event day [0;0]

Table 4-7: Issuer’s Abnormal Bond Returns and Univariate Comparison for the “Complete Sample” (Firm Level Approach) ← XVI | XVII →

Table 4-8: Issuer’s Abnormal Bond Returns and Univariate Comparison for the “Control Sample” (Firm Level Approach)

Table 4-9: Issuer’s Abnormal Bond Returns and Univariate Comparison for the “Complete Sample” (Bond Level Approach)

Table 4-10: Issuer’s Abnormal Bond Returns and Univariate Comparison for the “Control Sample” (Bond Level Approach)

Table 4-11: Issuer’s Abnormal Bond Returns for the Regularly Issued Bond at the Announcement of the Reopening

Table 4-12: Issuer’s Abnormal Stock Returns and Univariate Comparison for the “Complete Sample” (Regular Estimation Window)

Table 4-13: Issuer’s Abnormal Stock Returns and Univariate Comparison for the “Control Sample” (Regular Estimation Window)

Table 4-14: Issuer’s Abnormal Stock Returns and Univariate Comparison for the “Complete Sample” (Irregular Estimation Window)

Table 4-15: Issuer’s Abnormal Stock Returns and Univariate Comparison for the “Control Sample” (Irregular Estimation Window)

Table 4-16: Cross Sectional Regression Analysis of Reopening Announcements on Bond Returns

Details

Pages
XXIV, 183
Publication Year
2016
ISBN (PDF)
9783653064261
ISBN (MOBI)
9783653952568
ISBN (ePUB)
9783653952575
ISBN (Softcover)
9783631671191
DOI
10.3726/978-3-653-06426-1
Language
English
Publication date
2016 (March)
Keywords
Corporate Bond Event Study Synergy Disclosure Debt Security
Published
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2016. XXIV, 183 pp.
Product Safety
Peter Lang Group AG

Biographical notes

Daniel Maul (Author)

Daniel Maul studied Business Administration and Engineering (Wirtschaftsingenieurwesen) at Darmstadt University of Technology. He worked as a research and teaching assistant at the Chair of Corporate Finance.

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Title: Analyzing Wealth Effects for Bondholders