Leveraged buyouts: An analysis of returns to bondholders and stockholders
Abstract
Scope of Study: This study investigates the abnormal security returns, if any, when a leveraged buyout proposal is announced. Abnormal returns for a period of 61 days surrounding the announcement date for stocks and 22 days for bonds are analyzed. The stock data is obtained from the Center for Research in Security Prices (CRSP) tape and the Bond data from The Wall Street Journal . Three hypotheses with regard to affect of leveraged buyouts on stocks and bonds were analyzed. Findings of the Study: The common stockholders tend to gain by the announcement of a leveraged buyout while the bondholders lose as seen in the announcement period. The results are consistent with the belief that the party engaging in leveraged buyouts share the gains that they expect to realize from leveraged buyouts with the stockholders. It also appears that part of these gains come at the expense of bondholders.
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- OSU Master's Report [734]