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Creditor rights, claims enforcement, and bond returns in mergers and acquisitions

Research output: Scientific - peer-reviewArticle

By means of an international sample of cross-border mergers and acquisitions (M&As) involving firms with outstanding Eurobonds from the US, Europe, and other countries around the world, we show that bond performance around M&A announcements is sensitive to cross-country differences in creditor protection and claims enforcement in a court of law. Bidder and target bonds perform significantly better when they become exposed to a jurisdiction with stronger creditor rights or with more efficient enforcement of creditor claims. These spillover effects in better creditor protection outweigh the effects of legal origin and exposure to other more general corporate governance measures such as the rule of law or better anti-director rights. The spillovers are intensified by the ability of creditors to perform insolvency arbitrage across legal systems, and are higher for longer maturity bonds, bonds issued by firms with high asset risk, and bonds issued by firms with a higher likelihood of financial distress.
Original languageEnglish
Pages (from-to)174-194
JournalJournal of International Business Studies (JIBS)
Volume48
Issue number2
DOIs
StateAccepted/In press - 3 Feb 2017

    Research areas

  • bondholder value, cross-border mergers and acquisitions (M&As), creditor rights, legal enforcement, event study, Eurobonds

DOI

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