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Does the type of debt matter? Stock market perception in Europe

Author

Listed:
  • Zuzana Fungáčová
  • Christophe J. Godlewski

    (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

  • Laurent Weill

    (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

Abstract

We study the effect of bank loan and bond announcements on borrower's stock price. We apply an event study methodology on a sample of companies from 17 European countries and find that debt announcement generates a positive stock market reaction. However, our main conclusion is that the issuance of a loan exerts a significantly stronger reaction than does the issuance of a bond. This finding supports the hypothesis that loan issuance has a positive certification effect. The analysis of determinants of abnormal returns following debt announcements shows a positive impact of financial development and a negative effect of the Eurozone crisis.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Zuzana Fungáčová & Christophe J. Godlewski & Laurent Weill, 2019. "Does the type of debt matter? Stock market perception in Europe," Post-Print hal-03047778, HAL.
    • Handle: RePEc:hal:journl:hal-03047778
    DOI: 10.1016/j.qref.2019.04.009
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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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