Abstract

http://ssrn.com/abstract=2247763
 
 

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Bond Market Response to the Collapse of Prominent Investment Banks


Si Li


Wilfrid Laurier University - School of Business & Economics

Jeff Madura


Florida Atlantic University - College of Business

Nivine Richie


University of North Carolina Wilmington

April 9, 2013


Abstract:     
We assess the bond market response to the Bear Stearns rescue in March 2008 and the Lehman Brothers failure (combined with news about the acquisition of Merrill Lynch and AIG's investment banking problems and subsequent rescue) in September 2008. The Bear Stearns rescue elicited a moderately favorable impact on bond prices, which may suggest that the regulatory intervention reduced fear and stabilized bond markets. Conversely, the Lehman Brothers failure elicited a pronounced negative impact on bond prices. For both credit events, the bond price effects were less favorable or more negative for financial issuers. The effects of other firm-specific and bond-specific characteristics are conditioned on the credit event, and whether the issuer was a financial or non-financial firm.

Number of Pages in PDF File: 53

Keywords: bonds, event study, market efficiency, credit spreads

JEL Classification: G12, G14

working papers series


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Date posted: April 10, 2013  

Suggested Citation

Li, Si and Madura, Jeff and Richie, Nivine, Bond Market Response to the Collapse of Prominent Investment Banks (April 9, 2013). Available at SSRN: http://ssrn.com/abstract=2247763 or http://dx.doi.org/10.2139/ssrn.2247763

Contact Information

Si Li
Wilfrid Laurier University - School of Business & Economics ( email )
Waterloo, Ontario N2L 3C5
Canada
Jeff Madura
Florida Atlantic University - College of Business ( email )
University Tower
220 SE 2 Avenue
Fort Lauderdale, FL 33301
United States
(954)762-5632 (Phone)
(954)762-5245 (Fax)
Nivine Richie (Contact Author)
University of North Carolina Wilmington ( email )
Wilmington, NC 28403
United States
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