Developments in corporate creditworthiness around ownership events
Purpose – This study seeks to explore developments in corporate creditworthiness before and after ownership events. Design/methodology/approach – The paper uses the Blockholders database of Dlugosz, Fahlenbrach, Gompers, and Metrick, and three credit quantities, and deploys a standard event study methodology to examine the relation to corporate creditworthiness. Findings – The paper discovers that ownership-construction is generally associated with prior- and post-improvement in creditworthiness, while a block-destruction is typically surrounded by deterioration in corporate creditworthiness. The paper also finds proper evidence for a relation between the construction or destruction of managerial block and future developments in corporate creditworthiness. The paper further realizes that outside shareholders exhibit higher impact than inside block-holders on later variations in credit risk. Research limitations/implications – The paper is unable to conduct further robustness checks with structural credit methodologies due to the reduced number of valid observations. Originality/value – Market participants can utilize the conclusions to better predict future trends in corporate creditworthiness.
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Volume (Year): 7 (2011)
Issue (Month): 4 (September)
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