Research Discussion Papers, Bank of Finland
No 19/2015:
Does the type of debt matter? Stock market perception in Europe
Zuzana Fungácová ()
, Christophe J. Godlewski ()
and Laurent Weill ()
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; (follow links to similar papers)
JEL-Codes: G14; G20; (follow links to similar papers)
34 pages, August 20, 2015
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