THE MARKET REACTION TO STRAIGHT DEBT ISSUES: THE EFFECTS OF FREE CASH FLOW

Shawn D. Howton · Shelly W. Howton · Steven B. Perfect

53 citations0/0 files storedThe Journal of Financial Research

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Corporate Finance and Governance Financial Markets and Investment Strategies Credit Risk and Financial Regulations

Abstract

Abstract In this paper we measure the market reaction to 937 straight debt issues between 1983 and 1993. We find a negative and significant market reaction to a straight debt announcement. In addition, we find that the market reaction to a straight debt issue is directly related to the issuing firm's level of existing cash and inversely related to the issuing firm's investment opportunities.

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