The market for corporate control and the cost of debt

• 成果类型: Article
• 署名作者: Qiu, Jiaping; Yu, Fan
• 署名单位: Claremont Colleges; Claremont McKenna College; Claremont Graduate University; McMaster University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.10.002
• 发表日期: 2009
• 页码: 505-524
• 关键词: Cost of debt; Credit spread; Market for corporate control; Business combination laws

摘要

How do bond holders view the existence of an open market for corporate control? Between 1985 and 1991,30 states in the U.S. enacted business combination (BC) laws, raising the cost of corporate takeovers. Relying on these exogenous events, we estimate the influence of the market for corporate control on the cost of debt. We identify different channels through which an open market for corporate control can benefit or harm bondholders: a reduction in managerial slack or the quiet life, resulting in higher profitability and firm value; a coinsurance effect, in which firms become less risky after being acquired; and an increasing leverage effect, in which bond holder wealth is expropriated through leverage-increasing takeovers. Consistent with the first two mechanisms, we find that the cost of debt rose after the passage of the BC laws; moreover, it rose sharply for firms in non-competitive industries, and for firms rated speculative-grade. In contrast, there is virtually no effect for firms in competitive industries, or firms rated investment-grade. (C) 2009 Elsevier B.V. All rights reserved.