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Bond Performance in Mergers and Acquisitions: The Impact and Spillover of Governance and Legal StandardsPeter G. SzilagyiUniversity of Cambridge - Judge Business School Luc RenneboogTilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC) November 15, 2007 ECGI Finance Working Paper No. 125 EFA 2007 Ljubljana Meetings Paper Abstract: This paper shows that bond performance around M&A announcements is extremely sensitive to cross-country differences in governance and legal standards, using deals involving European bidders with outstanding Eurobonds. Firstly, stakeholder-oriented corporate governance ensures that Continental European bonds fare better in and respond less to the risk effects of M&As. Secondly, bonds fare worse in cross-border M&As ceteris paribus, but perform better when they become exposed to a stakeholder-oriented governance regime or a more creditor-friendly jurisdiction. The creditor protection spillovers we identify are much greater in scope than has been previously assumed, and are intensified by the ability of creditors to arbitrage across legal systems.
Number of Pages in PDF File: 47 Keywords: Mergers and acquisitions, bond performance, creditor rights, legal arbitrage, corporate governance JEL Classification: G34, G32, G12, G14 working papers seriesDate posted: March 24, 2008Suggested CitationContact Information
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