TY  - UNPD
A1  - Gropp, Reint
A1  - Hirsch, Christian
A1  - Krahnen, Jan Pieter
T1  - Is rated debt arm's length? : evidence from mergers and acquisitions
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2011,10
N2  - In this paper we challenge the view that corporate bonds are always arm’s length debt. We analyze the effect of bond ratings on the stock price return to acquirers in M&A transactions, which tend to have significant effects on creditor wealth. We find acquirers abnormal returns to be higher if they are unrated, controlling for a wide variety of other effects identified in the literature. Tracing the difference in returns to distinct managerial decisions, we find that, everything else constant, rated firms increase their leverage in takeover transactions by less than their unrated counterparts. Consistent with a significant role for rating agencies, we find monitoring effects to be strongest when acquirer bonds are rated at the borderline between investment grade and junk. Finally, we are able to empirically exclude a large number of alternative explanations for the empirical regularities that we uncover. JEL Classification: G21, G24, G32, G34 Keywords: Acquisitions, Credit Ratings, Mergers and Acquisitions, Arm’s Length Debt, Abnormal Returns
T3  - CFS working paper series - 2011, 10 
KW  - Acquisitions
KW  - Credit Ratings
KW  - Mergers and Acquisitions
KW  - Arm’s Length Debt
KW  - Abnormal Returns
Y1  - 2011
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/16868
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-101925
IS  - March 2011
ER  -