Download this Paper Open PDF in Browser

The Impact of Shareholder Power on Bondholders: Evidence from Mergers and Acquisitions

60 Pages Posted: 17 Mar 2006  

Anil K. Makhija

Ohio State University (OSU) - Department of Finance

Angie Low

Nanyang Technological University - Division of Banking & Finance

Anthony B. Sanders

George Mason University - School of Business

Date Written: March 13, 2006

Abstract

Takeovers result in the transfer of bondholders' claims from the target to the acquiring firm, providing a setting to examine the impact of a change in shareholder power on bondholders. We find that an increase in the holdings of the top 5 acquirer institutional owners, a measure of shareholder power, from the 1st to the 3rd quartile in our sample is associated with an economically significant increase of 0.74% in excess returns to target bondholders. This supports the view that stronger shareholder power, through superior monitoring of managers, improves collateral values. Thus, good corporate governance can be beneficial to bondholders as well. Our findings, which contradict prior work, are robust to various proxies for shareholder power, adjustments for endogeneity, controls for target shareholder power, and other controls for firm and deal characteristics that have been shown to affect bondholders' wealth during takeovers.

Keywords: Bondholders, Corporate Governance, Mergers and Acquisitions

JEL Classification: G34

Suggested Citation

Makhija, Anil K. and Low, Angie and Sanders, Anthony B., The Impact of Shareholder Power on Bondholders: Evidence from Mergers and Acquisitions (March 13, 2006). Available at SSRN: https://ssrn.com/abstract=891683 or http://dx.doi.org/10.2139/ssrn.891683

Anil K. Makhija (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-1899 (Phone)

Angie Low

Nanyang Technological University - Division of Banking & Finance ( email )

Singapore, 639798
Singapore

Anthony Bown Sanders

George Mason University - School of Business ( email )

Fairfax, VA 22030
United States

Paper statistics

Downloads
358
Rank
69,044
Abstract Views
2,113