The Market Reaction to Straight Debt Issues: The Effects of Free Cash Flow.
In this paper we examine the market's reaction to 937 straight debt issues between 1983 and 1993. We also test the effect that firm's existing cash flow and investment opportunities have on the market reaction. We find a negative and significant market reaction to a straight debt announcement. In addition, we find tht 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.
|Main Author:||Howton, Shawn D.|
|Other Authors:||Howton, Shelly W., Perfect, Steven B.|