The Impact of Shareholder Power on Bondholders: Evidence from Mergers and Acquisitions
60 Pages Posted: 17 Mar 2006
Date Written: March 13, 2006
Abstract
Takeovers result in the transfer of bondholders' claims from the target to the acquiring firm, providing a setting to examine the impact of a change in shareholder power on bondholders. We find that an increase in the holdings of the top 5 acquirer institutional owners, a measure of shareholder power, from the 1st to the 3rd quartile in our sample is associated with an economically significant increase of 0.74% in excess returns to target bondholders. This supports the view that stronger shareholder power, through superior monitoring of managers, improves collateral values. Thus, good corporate governance can be beneficial to bondholders as well. Our findings, which contradict prior work, are robust to various proxies for shareholder power, adjustments for endogeneity, controls for target shareholder power, and other controls for firm and deal characteristics that have been shown to affect bondholders' wealth during takeovers.
Keywords: Bondholders, Corporate Governance, Mergers and Acquisitions
JEL Classification: G34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Corporate Governance and Equity Prices
By Paul A. Gompers, Joy L. Ishii, ...
-
What Matters in Corporate Governance?
By Lucian A. Bebchuk, Alma Cohen, ...
-
Governance Mechanisms and Equity Prices
By Martijn Cremers and Vinay B. Nair
-
Did New Regulations Target the Relevant Corporate Governance Attributes?
By Reena Aggarwal and Rohan Williamson
-
Governance Mechanisms and Bond Prices
By Martijn Cremers, Vinay B. Nair, ...
-
Corporate Governance and Merger Activity in the U.S.: Making Sense of the 1980s and 1990s
-
Corporate Governance and Merger Activity in the U.S.: Making Sense of the 1980s and 1990s
-
The Costs of Entrenched Boards
By Lucian A. Bebchuk and Alma Cohen