Does the Type of Debt Matter? Stock Market Perception in Europe

Zuzana Fungáčová, Christophe Godlewski and Laurent Weill

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), 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. We find that debt announcement generates a positive stock market reaction. However our main conclusion is that the issuance of a loan exerts a significantly higher reaction than the issuance of a bond. This finding supports the hypothesis that loan issuance conveys a positive certification effect. The analysis of the determinants of abnormal returns following debt announcements shows a positive impact of financial development and a negative effect of the Eurozone crisis.

Keywords: corporate bonds; syndicated loans; event study; stock returns; Europe. (search for similar items in EconPapers)
JEL-codes: G14 G20 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eur and nep-fmk
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Does the type of debt matter? Stock market perception in Europe (2020)
Working Paper: Does the type of debt matter? Stock market perception in Europe (2019)
Working Paper: Does the type of debt matter? Stock market perception in Europe (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2015-03

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