Bond Market Entry Around the World: Does Public Debt Discipline Managers?

46 Pages Posted: 25 Aug 2005

See all articles by Willem Schramade

Willem Schramade

RSM Erasmus University; Sustainable Finance Factory

Date Written: June 27, 2006

Abstract

This paper documents the impact of bond IPOs on the agency costs of equity. We find that bond market entry is received unfavorably when the debt issue is motivated by keeping a lock on control. Conversely, when discipline is expected to increase due to bond market entry (high free cash flow, low dividends), stock price reactions are more positive. Moreover, the strength of these relations is affected by worldwide differences in shareholder protection. Free cash flow has a larger impact when investor protection is stronger, whereas dividends and control locks are more important when shareholder protection is poor.

Keywords: Ownership structure, Initial Public Offerings (IPOs), Debt

JEL Classification: G32, G34, G35

Suggested Citation

Schramade, Willem, Bond Market Entry Around the World: Does Public Debt Discipline Managers? (June 27, 2006). Available at SSRN: https://ssrn.com/abstract=786365 or http://dx.doi.org/10.2139/ssrn.786365

Willem Schramade (Contact Author)

RSM Erasmus University ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands

Sustainable Finance Factory ( email )

18
Rotterdam, 3034 SG
0682011037 (Phone)

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