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

TitleCreditor rights, claims enforcement, and bond performance in mergers and acquisitions
Publication TypeJournal Article
AuthorsRenneboog, Luc, Peter G. Szilagyi, and Cara Vansteenkiste
Journal titleJournal of International Business Studies
Year2017
Abstract

This article 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.

Publisher linkhttp://link.springer.com/article/10.1057/s41267-016-0031-2