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Cash holdings and bond returns around takeovers

journal contribution
posted on 01.07.2016, 00:00 authored by Edward PodolskiEdward Podolski, C Truong, M Veeraraghavan
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.

History

Journal

International review of financial analysis

Volume

46

Pagination

1 - 11

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1057-5219

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2016, Elsevier