Stock market reaction to debt financing arrangements in Russia

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Title: Stock market reaction to debt financing arrangements in Russia
Author: Godlewski, Christophe J. ; Fungáčová, Zuzana ; Weill, Laurent
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 16/2010
Year of publication: 2010
Publication date: 25.8.2010
Published in: Published in Comparative Economic Studies, 2011, 53, (679-693)
DOI: 10.1057/ces.2011.19
Pages: 24 s.
Keywords: osakemarkkinat; osakkeet; tuotot; joukkovelkakirjat; Venäjä; rahoitus; yritykset; luotot; Bofit-kokoelma; velkarahoitus; syndikoidut lainat
JEL: G14; G20; P30
Abstract: This paper investigates stock market reaction to debt arrangements in Russia. The analysis of the valuation of debt arrangements by stock markets provides information about the use of debt by Russian companies. We apply the event study methodology to check whether debt announcements lead to abnormal returns using a sample of Russian listed companies that issued syndicated loans or bonds between June 2004 and December 2008. We find a negative reaction of stock markets to debt arrangements that can be explained by moral hazard behavior of shareholders at the expense of debtholders. Further, we observe no significant difference between announcements of syndicated loans and bonds. Thus, our findings support the view that Russian companies could have incentives to limit their reliance on external debt. Keywords: corporate bonds, event study, Russia, stock returns, syndicated loans. JEL Classification: G14, G20, P30.

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