Developments in corporate creditworthiness around ownership events

Dror Parnes

International Journal of Managerial Finance, 2011, vol. 7, issue 4, 377-396

Abstract: Purpose - This study seeks to explore developments in corporate creditworthiness before and after ownership events. Design/methodology/approach - The paper uses the Blockholders database of Dlugosz, Fahlenbrach, Gompers, and Metrick, and three credit quantities, and deploys a standard event study methodology to examine the relation to corporate creditworthiness. Findings - The paper discovers that ownership‐construction is generally associated with prior‐ and post‐improvement in creditworthiness, while a block‐destruction is typically surrounded by deterioration in corporate creditworthiness. The paper also finds proper evidence for a relation between the construction or destruction of managerial block and future developments in corporate creditworthiness. The paper further realizes that outside shareholders exhibit higher impact than inside block‐holders on later variations in credit risk. Research limitations/implications - The paper is unable to conduct further robustness checks with structural credit methodologies due to the reduced number of valid observations. Originality/value - Market participants can utilize the conclusions to better predict future trends in corporate creditworthiness.

Keywords: Block holders; Ownership event; Creditworthiness; Altman Z‐Score; CFBM‐Score; Ohlson O‐Score; Shareholders; Corporate ownership (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:7:y:2011:i:4:p:377-396

DOI: 10.1108/17439131111166384

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