Bond Performance in Mergers and Acquisitions: The Impact and Spillover of Governance and Legal Standards
Peter G. Szilagyi
University of Cambridge - Judge Business School
Tilburg 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
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, G14working papers series
Date posted: March 24, 2008
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