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Stock market reaction to debt financing arrangements in Russia

  • Godlewski, Christophe J.

    (BOFIT)

  • Fungacova, Zuzana

    ()

    (BOFIT)

  • Weill, Laurent

    (BOFIT)

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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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/DP1610.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 16/2010.

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Length: 24 pages
Date of creation: 25 Aug 2010
Date of revision:
Handle: RePEc:hhs:bofitp:2010_016
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Fungacova, Zuzana & Godlewski, Christophe J. & Weill, Laurent, 2009. "Asymmetric Information and Loan Spreads in Russia: Evidence from Syndicated Loans," BOFIT Discussion Papers 7/2009, Bank of Finland, Institute for Economies in Transition.
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