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  • Cash holdings and bond returns around takeovers

    Author(s)
    Podolski, Edward J.
    Truong, Cameron
    Veeraraghavan, Madhu
    Griffith University Author(s)
    Veeraraghavan, Madhu
    Year published
    2016
    Metadata
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    Abstract
    Using a large sample of 2712 unique U.S. domestic takeovers over the period 1993 to 2014, we show a negative relation between the level of cash holdings and post-announcement corporate bond returns. Our findings support the agency cost of cash holdings view and show that bondholders and shareholders share the same interests with respect to cash policy around takeovers. We further find that cash holdings are viewed less negatively by bondholders in firms with strong shareholders. This paper is the first to document the role of cash holdings on bondholder wealth around takeover announcements.Using a large sample of 2712 unique U.S. domestic takeovers over the period 1993 to 2014, we show a negative relation between the level of cash holdings and post-announcement corporate bond returns. Our findings support the agency cost of cash holdings view and show that bondholders and shareholders share the same interests with respect to cash policy around takeovers. We further find that cash holdings are viewed less negatively by bondholders in firms with strong shareholders. This paper is the first to document the role of cash holdings on bondholder wealth around takeover announcements.
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    Journal Title
    International Review of Financial Analysis
    Volume
    46
    DOI
    https://doi.org/10.1016/j.irfa.2016.04.002
    Subject
    Banking, Finance and Investment not elsewhere classified
    Accounting, Auditing and Accountability
    Banking, Finance and Investment
    Law
    Publication URI
    http://hdl.handle.net/10072/172398
    Collection
    • Journal articles

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