Does the Type of Debt Matter? Stock Market Perception in Europe

34 Pages Posted: 21 Oct 2015 Last revised: 18 May 2019

See all articles by Zuzana Fungáčová

Zuzana Fungáčová

Bank of Finland

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: August 21, 2015

Abstract

We study the effect of bank loan and bond announcements on borrower’s stock price. We apply an event study methodology on a sample of companies from 17 European countries and find that debt announcement generates a positive stock market reaction. However, our main conclusion is that the issuance of a loan exerts a significantly stronger reaction than does the issuance of a bond. This finding supports the hypothesis that loan issuance has a positive certification effect. The analysis of determinants of abnormal returns following debt announcements shows a positive impact of financial development and a negative effect of the Eurozone crisis.

Keywords: corporate bonds, syndicated loans, event study, stock returns, Europe

JEL Classification: G14, G20

Suggested Citation

Fungáčová, Zuzana and Godlewski, Christophe J. and Weill, Laurent, Does the Type of Debt Matter? Stock Market Perception in Europe (August 21, 2015). Bank of Finland Research Discussion Paper No. 19/2015. Available at SSRN: https://ssrn.com/abstract=2677014

Zuzana Fungáčová (Contact Author)

Bank of Finland

P.O. Box 160
Helsinki 00101
Finland

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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