Podolski, Edward J., Truong, Cameron and Veeraraghavan, Madhu 2016, Cash holdings and bond returns around takeovers, International review of financial analysis, vol. 46, pp. 1-11, doi: 10.1016/j.irfa.2016.04.002.
Using a large sample of 2712 unique U.S. domestic takeovers over the period 1993 to 2014, we show a negative relation between the level of cash holdings and post-announcement corporate bond returns. Our findings support the agency cost of cash holdings view and show that bondholders and shareholders share the same interests with respect to cash policy around takeovers. We further find that cash holdings are viewed less negatively by bondholders in firms with strong shareholders. This paper is the first to document the role of cash holdings on bondholder wealth around takeover announcements.
Field of Research
150201 Finance 1502 Banking, Finance And Investment 1501 Accounting, Auditing And Accountability 1801 Law
Socio Economic Objective
919999 Economic Framework not elsewhere classified
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