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Creditor rights, claims enforcement, and bond returns in mergers and acquisitions

Renneboog,Luc
; 
Szilagyi,Peter
; 
Vansteenkiste,Cara
Abstract
This article shows that country-level differences in creditor protection affect bond performance around cross-border M&A announcements. Using Eurobonds and a global sample of 1,100 cross-border M&As, we find that the bondholders of bidding firms respond more positively to deals that expose their firm to a jurisdiction with stronger creditor rights and more efficient claims enforcement through courts. Positive creditor protection spillovers are enhanced by now-global jurisdictional cooperation in multinational insolvencies and creditors’ ability to do insolvency arbitrage. The spillover effects we observe are stronger for firms with higher asset risk, longer maturity bonds, and a higher likelihood of financial distress.
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2017-02
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Tilburg University Research Output Collection
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Keywords
bondholder value, cross-border mergers and acquisitions (M&As), creditor rights, legal enforcement, event study, Eurobonds, G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance, G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill, G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates, G14 - Information and Market Efficiency ; Event Studies ; Insider Trading
Citation
Renneboog, L, Szilagyi, P & Vansteenkiste, C 2017, 'Creditor rights, claims enforcement, and bond returns in mergers and acquisitions', Journal of International Business Studies, vol. 48, no. 2, pp. 174-194. https://doi.org/10.1057/s41267-016-0031-2
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https://hdl.handle.net/20.500.14602/66412
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info:eu-repo/semantics/openAccess
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