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The Impact of Shareholder Power on Bondholders: Evidence from Mergers and Acquisitions

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  • Low, Angie

    (Ohio State U and Nanyang Technological U)

  • Makhija, Anil K.

    (Ohio State U)

  • Sanders, Anthony B.

    (Ohio State U)

Abstract

Takeovers result in the transfer of bondholders' claims from the target to the acquiring firm, providing a setting to examine the impact of shareholder power on bondholders. We find that excess returns to target bondholders at M & A announcements are positively related to the holdings of the top 5 acquirer institutional owners, a measure of shareholder power. This supports the view that stronger shareholder power, through superior monitoring of managers, can be beneficial to bondholders as well. Our findings are robust to various proxies for shareholder power, adjustments for endogeneity, controls for target shareholder power, and other controls for firm and deal characteristics that have been shown to affect bondholders' wealth during takeovers.

Suggested Citation

  • Low, Angie & Makhija, Anil K. & Sanders, Anthony B., 2007. "The Impact of Shareholder Power on Bondholders: Evidence from Mergers and Acquisitions," Working Paper Series 2007-5, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2007-5
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    File URL: http://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-5.pdf
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    1. Gropp, Reint E. & Hirsch, Christian & Krahnen, Jan Pieter, 2011. "Is rated debt arm's length? Evidence from mergers and acquisitions," CFS Working Paper Series 2011/10, Center for Financial Studies (CFS).

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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