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Creditor Rights, Claims Enforcement, and Bond Performance in Mergers and Acquisitions

Luc Renneboog (), Peter Szilagyi () and Cara Vansteenkiste
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Cara Vansteenkiste: Tilburg University, Center For Economic Research

No 2017-012, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: This paper shows that country-level differences in creditor protection affect bond performance around cross-border M&A announcements. Using Eurobonds and a global sample of 1,100 cross-border M&As, we find that the bondholders of bidding firms respond more positively to deals that expose their firm to a jurisdiction with stronger creditor rights and more efficient claims enforcement through courts. Positive creditor protection spillovers are enhanced by now-global jurisdictional cooperation in multinational insolvencies and creditors’ ability to do insolvency arbitrage. The spillover effects we observe are stronger for firms with higher asset risk, longer maturity bonds, and a higher likelihood of financial distress.

Keywords: bondholder value; cross-border mergers and acquisitions (M&As); creditor rights; legal enforcement; eurobonds (search for similar items in EconPapers)
JEL-codes: G34 G32 G12 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-law
Date: 2017
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