1. Open Access Kent State
  2. New Considerations in the Announcement Effects of Privately Placed Debt
Author(s)
Abstract

We examine the stock price reaction to announcements of privately placed debt. The results suggest no effect for firms with a public debt rating and offsetting effects for firms without a public debt rating. If the private placement appears to reduce monitoring for a firm without a debt rating, it produces a significantly negative price response. However, if it appears to increase financial flexibility and bargaining power, it produces a positive reaction. Overall, the evidence suggests that private placements of debt are more similar to public bond issues than bank loans in terms of the price reaction at the announcement.
Format
Article
Identifier(s)
10.1016/j.irfa.2006.09.005
Publication Date
2008-06-01
Publication Title
International Review of Financial Analysis
Volume
17
Issue
3
First Page
507
Last Page
522
Keywords
Subject
Rights
https://rightsstatements.org/page/InC/1.0/
Community
Department of Finance
Permalink https://oaks.kent.edu/finpubs/3
Dennis, S., & Lu, W. (2008). New Considerations in the Announcement Effects of Privately Placed Debt. International Review of Financial Analysis. https://doi.org/10.1016/j.irfa.2006.09.005
Dennis, Steven, and Weili Lu. 2008. “New Considerations in the Announcement Effects of Privately Placed Debt”. International Review of Financial Analysis. https://doi.org/10.1016/j.irfa.2006.09.005.
Dennis, S., and W. Lu. New Considerations in the Announcement Effects of Privately Placed Debt. International Review of Financial Analysis, 1 June 2008, doi:10.1016/j.irfa.2006.09.005.