New considerations in the announcement effects of privately placed debt
AbstractWe examine the stock price reaction to announcements of privately placed debt. The results suggest no effect for firms with a public debt rating and offsetting effects for firms without a public debt rating. If the private placement appears to reduce monitoring for a firm without a debt rating, it produces a significantly negative price response. However, if it appears to increase financial flexibility and bargaining power, it produces a positive reaction. Overall, the evidence suggests that private placements of debt are more similar to public bond issues than bank loans in terms of the price reaction at the announcement.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 17 (2008)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/inca/620166
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