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Stock market reaction to debt financing arrangements in Russia

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  • Christophe J. Godlewski

    ()
    (LaRGE Research Center, Université de Strasbourg)

  • Zuzana Fungacova

    (BOFIT, Bank of Finland)

  • Laurent Weill

    (LaRGE Research Center, Université de Strasbourg)

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.

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Bibliographic Info

Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2010-10.

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Date of creation: 2010
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Handle: RePEc:lar:wpaper:2010-10

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Keywords: Corporate bonds; event study; Russia; stock returns; syndicated loans.;

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  1. Zuzana Fungacova & Christophe J. Godlewski & Laurent Weill, 2009. "Asymmetric Information and Loan Spreads in Russia: Evidence from Syndicated Loans," Working Papers of LaRGE Research Center 2009-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
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Cited by:
  1. Godlewski, Christophe J., 2014. "Bank loans and borrower value during the global financial crisis: Empirical evidence from France," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 100-130.
  2. Christophe Godlewski, 2012. "Are bank loans still “special” (especially during a crisis)? Empirical evidence from a European country," Working Papers of LaRGE Research Center 2012-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

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