Call it Good, Bad or No News? The Valuation Effect of Debt Issues

27 Pages Posted: 17 Dec 2017

See all articles by Yushu Zhu

Yushu Zhu

University of Queensland - Business School

Date Written: December 2017


Studies investigating market reactions to changes in capital structure aim to find the impact of private information conveyed. However, these studies ignore that financial decisions are not made randomly but are conditional on managers’ private information. Using a sample of U.S. leverage‐increasing public companies with public long‐term debt offerings, we find that debt offerings convey no new information to the markets after considering the conditionality of decisions. We also show that results can be biased if the deterministic role played by private information ex ante is omitted, which may explain the conflicting valuation evidence found in the literature.

Keywords: Private information, Debt Issuance, Capital Structure, Valuation Effect, Self‐Selection

Suggested Citation

Zhu, Yushu, Call it Good, Bad or No News? The Valuation Effect of Debt Issues (December 2017). Accounting & Finance, Vol. 57, Issue 4, pp. 1203-1229, 2017, Available at SSRN: or

Yushu Zhu (Contact Author)

University of Queensland - Business School ( email )

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