Article1989

Information Effects Associated with Debt-For-Equity and Equity-For-Debt Exchange Offers

Marcia Millon Cornett · Nickolaos G. Travlos

91 citations0/0 files storedThe Journal of Finance

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

ABSTRACT This study investigates the information effect caused by a firm's change in capital structure via debt‐for‐equity and equity‐for‐debt exchange offers. The evidence suggests that the former transactions lead to abnormal stock price increases, while the latter lead to abnormal stock price decreases. In addition, findings based on analysis of bond returns and cross‐sectional regressions do not lend support to the wealth‐transfer‐ and tax‐effect hypotheses, but they are consistent with the information‐effect hypothesis.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1984Corporate financing and investment decisions when firms have information that investors do not have 1984Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have 1985Using daily stock returns 1963CORPORATE INCOME TAXES AND THE COST OF CAPITAL: A CORRECTION 1977The Determination of Financial Structure: The Incentive-Signalling Approach 1977INFORMATIONAL ASYMMETRIES, FINANCIAL STRUCTURE, AND FINANCIAL INTERMEDIATION 1977Informational Asymmetries, Financial Structure, and Financial Intermediation

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