Does the type of debt matter? Stock market perception in Europe

Zuzana Fungáčová, Christophe Godlewski and Laurent Weill

The Quarterly Review of Economics and Finance, 2020, vol. 75, issue C, 247-256

Abstract: We study the effect of syndicated loan and bond announcements on the stock price of borrowers. No work since James (1987) on US data has compared the impact of both types of announcements on the same sample. Applying an event study methodology on a sample of companies from 17 Western European countries, we find that debt announcements tend to generate a positive stock market reaction. Our main conclusion is that loan issuance exerts a significantly stronger reaction than a bond issuance. This finding supports the hypothesis that loan issuance has a positive certification effect. The analysis of determinants of abnormal returns following debt announcements shows a positive impact for financial development and a negative effect for 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: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
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)
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:eee:quaeco:v:75:y:2020:i:c:p:247-256

DOI: 10.1016/j.qref.2019.04.009

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