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Analyzing Wealth Effects for Bondholders

New Insight on Major Corporate Events from the Debtholders’ Perspective


Daniel Maul

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.
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5. Concluding Remarks


5.1 Summary and Discussion of the Main Results

The importance and relevance of funds through debt for companies has grown dramatically over the last 15–20 years.64 Financial and non-financial firms increasingly rely on bonds to finance their investments not only in the US and Europe, but also in many emerging markets. However, corporate debt and debt securities still play only a negligible role when it comes to empirical research on capital markets. Several reasons exist which explain this development, the main one being the poor availability of necessary data. Yet, 15 years after the beginning of the new millennium the provision of data on corporate bonds is much more improved and continues to do so. Moreover, specific empirical tools for debt securities are developed and tested by researchers widening the focus of capital market research from just stocks on to the companies’ debt. Despite this pleasant development, most papers that investigate the incorporation of new information in firm value insist on limiting their analysis on equity securities. Thus, it is the strong belief of the author that research on capital markets needs to be steered to a more integrated approach including a firm’s debt together with equity to assess firm value changes. This thesis is one of many first steps towards this goal.

Chapter 2 provides an overview of event study methodologies applied to detect bondholders’ wealth effects, as well as discussion of bond specific characteristics which affect the utilization of event study...

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