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Corporate Restructuring and Bondholder Wealth

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Author Info
Renneboog, L.D.R.
Szilagy, Peter G. (TILEC (Tilburg Law and Economics Center))

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Abstract

This paper provides an overview of existing research on how corporate restructuring affects the wealth of creditors. Restructuring is defined as any transaction that affects the firm's underlying capital structure. Thus, it reaches well beyond asset restructuring and includes transactions such as leveraged buyouts, security issues and exchanges, and the issuance of stock options. The analysis identifies significant gaps in the literature, emphasizes the potential differences between creditor wealth changes in market- and network-oriented governance systems, and provides valuable insights into methodological advances. Many issues obviously remain, as empirical evidence is still incomplete and focuses exclusively on the US. In network-oriented regimes, the potential for research remains constrained by the lesser development of bond markets that disclose information on creditor wealth shocks. Still, on-going debt securitization should now allow for the investigation of at least some critical issues. This is imperative, as the position of creditors in the firm differs substantially across governance systems despite the gradual convergence of these regimes across the world.

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Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 7.

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Date of creation: 2006
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Handle: RePEc:dgr:kubtil:20067

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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