Cash holdings and bond returns around takeovers
Edward Podolski (),
Cameron Truong and
International Review of Financial Analysis, 2016, vol. 46, issue C, 1-11
Using a large sample of 2712 unique U.S. domestic takeovers over the period 1993 to 2014, we show a negative relation between the level of cash holdings and post-announcement corporate bond returns. Our findings support the agency cost of cash holdings view and show that bondholders and shareholders share the same interests with respect to cash policy around takeovers. We further find that cash holdings are viewed less negatively by bondholders in firms with strong shareholders. This paper is the first to document the role of cash holdings on bondholder wealth around takeover announcements.
Keywords: Takeovers; Cash holdings (search for similar items in EconPapers)
JEL-codes: G14 G30 G32 G34 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:46:y:2016:i:c:p:1-11
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