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Stock Market Reaction to Debt Financing Arrangements in Russia

Author

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  • Christophe Godlewski

    (EM Strasbourg Business School, Université de Strasbourg, 61 avenue de la Forêt Noire, 67000 Strasbourg, France.)

  • Zuzana Fungáčová

    (1] Bank of Finland Institute for Economies in Transition, Snellmaninaukio, 00101 Helsinki, Finland.
    [2] Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic.)

  • Laurent Weill

    (EM Strasbourg Business School, Université de Strasbourg, 61 avenue de la Forêt Noire, 67000 Strasbourg, France.)

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.

Suggested Citation

  • Christophe Godlewski & Zuzana Fungáčová & Laurent Weill, 2011. "Stock Market Reaction to Debt Financing Arrangements in Russia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 53(4), pages 679-693, December.
    • Handle: RePEc:pal:compes:v:53:y:2011:i:4:p:679-693
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    6. Davydov, Denis & Nikkinen, Jussi & Vähämaa, Sami, 2014. "Does the decision to issue public debt affect firm valuation? Russian evidence," Emerging Markets Review, Elsevier, vol. 20(C), pages 136-151.

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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • P30 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - General

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