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| Author: | Francis, B.B. (et al.) |
| Title: | The effect of state antitakeover laws on the firm's bondholders |
| Journal: | Journal of Financial Economics
2010 : APR, VOL. 96:1, p. 127-154 |
| Index terms: | USA corporate governance law |
| Freeterms: | antitakeover agency costs bondholders |
| Language: | eng |
| Abstract: | This study examines how state antitakeover (hereafter as: a-t-o.) laws affect bondholders and the cost of debt. There are four findings: 1. bonds issued by firms incorporated in takeover-friendly (as: t-o-f.) states have significantly higher at-issue yield spreads than bonds issued by firms in states with restrictive (as: rstv.) a-t-o. laws. 2. firms in t-o-f. states have significantly higher leverage than their counterparts in rstv. law states. 3. bond issues are associated with negative average stock price reactions among firms in t-o-f. states, but positive stock price reactions among firms in rstv. law states. 4. existing bond values increase, on average, on the introduction of Business Combination a-t-o. law. These results indicate that state a-t-o. laws tend to decrease bond yields and increase bond values, which is the opposite of their effect on equity values etc. |
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