Valuation Effects of Cancelled Debt Offerings

Marlin R. H. Jensen and William N. Pugh

Journal of Financial and Quantitative Analysis, 1991, vol. 26, issue 3, 425-431

Abstract: We examine the price behavior of the firm's common stock associated with cancelled straight debt offerings. Excluding utilities, we find negative excess returns associated with offering and cancellation announcements. Further, the stronger withdrawal reactions we find, when the funds were to be used for capital expenditures, may signal a decline in profitable investment opportunities. These results are consistent with Miller and Rock's (1985) hypothesis.

Date: 1991
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