THE MARKET REACTION TO STRAIGHT DEBT ISSUES: THE EFFECTS OF FREE CASH FLOW

Shawn D. Howton, Shelly W. Howton and Steven B. Perfect

Journal of Financial Research, 1998, vol. 21, issue 2, 219-228

Abstract: In this paper we measure the market reaction to 937 straight debt issues between 1983 and 1993. We find a negative and significant market reaction to a straight debt announcement. In addition, we find that the market reaction to a straight debt issue is directly related to the issuing firm's level of existing cash and inversely related to the issuing firm's investment opportunities.

Date: 1998
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