Cash holdings and bond returns around takeovers
Author(s)
Podolski, Edward J.
Truong, Cameron
Veeraraghavan, Madhu
Griffith University Author(s)
Year published
2016
Metadata
Show full item recordAbstract
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
Subject
Banking, Finance and Investment not elsewhere classified
Accounting, Auditing and Accountability
Banking, Finance and Investment
Law