BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 16/2010:
Stock market reaction to debt financing arrangements in Russia
Christophe J. Godlewski, Zuzana Fungacova ()
and Laurent Weill
Abstract: This paper investigates stock market reaction to debt
arrangements in Russia. The analysis of the valuation of debt arrangements
by stock markets provides information about the use of debt by Russian
companies. We apply the event study methodology to check whether debt
announcements lead to abnormal returns using a sample of Russian listed
companies that issued syndicated loans or bonds between June 2004 and
December 2008. We find a negative reaction of stock markets to debt
arrangements that can be explained by moral hazard behavior of shareholders
at the expense of debtholders. Further, we observe no significant
difference between announcements of syndicated loans and bonds. Thus, our
findings support the view that Russian companies could have incentives to
limit their reliance on external debt.
Keywords: corporate bonds; event study; Russia; stock returns; syndicated loans; (follow links to similar papers)
JEL-Codes: G14; G20; P30; (follow links to similar papers)
24 pages, August 25, 2010
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