DEBT REFUNDING AND SHAREHOLDER WEALTH: THE PRICE EFFECTS OF DEBT-FOR-DEBT EXCHANGE OFFER ANNOUNCEMENTS

This study examines the impact of debt refunding on common stock prices for a sample of 48 exchange offers announced from 1970 through 1981. Exchange offer announcements do not have a significant impact on average common stock returns but appear to produce idiosyncratic share price effects. Refunding-induced price effects were unrelated to several exchange offer characteristics including tax shield increases, exchange offer premia, and transaction costs of refunding. Common stock excess returns were negatively related to reductions in debt service payments and relaxation of dividend payment constraints. Thus, the evidence is consistent with theories predicting that certain debt refundings generate negative information-signaling price effects.     

EXCHANGEABLE DEBT CALLS AND SECURITY RETURNS

Exchangeable calls are not convertible into the calling firm's common stock but into the common stock of a target firm in which the calling firm has an ownership position. In addition to reducing leverage, exchangeables change the asset composition of the calling firm through the divestiture of the calling firm's ownership stake in the target firm. In contrast to the evidence on convertible calls, our findings indicate that announcements of exchangeable debt calls are not associated with an abnormal capital loss for the calling firm shareholders. For target firms, announcements of exchangeable calls reduce shareholder wealth. A lower probability of takeover resulting from diffusion of ownership concentration of the target firm's common stock may contribute to this result.     

THE MARKET REACTION TO STRAIGHT DEBT ISSUES: THE EFFECTS OF FREE CASH FLOW

In this paper we measure the market reaction to 937 straight debt issues between 1983 and 1993. We find a negative and significant market reaction to a straight debt announcement. In addition, we find that 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.     

SECURITIES PRICE EFFECTS OF UNIONIZATION LEGISLATION

Prior studies document that firms experience negative stock price effects in response to unionization. We study the economic effects of a radical change in unionization legislation in New Zealand and hypothesize that the stock price effect of unionization is a function of prior unionization status of firms. We provide evidence that legislative events that increase the likelihood of introducing more stringent legislation do not affect stock prices of high‐unionized firms, whereas low‐unionized firms are affected negatively and significantly. Legislative events that signal less stringent unionization legislation result in significant stock price increases for all firms.     

PRICE PERFORMANCE OF INITIAL PUBLIC OFFERINGS OF MASTER LIMITED PARTNERSHIP UNITS

This paper is the first to provide evidence on the pricing of initial public offerings of master limited partnerships (MLPs). A sample of fifty MLP offerings from January 1983 through July 1987 is analyzed. No significant underpricing (or overpricing) is found for the sample taken as a whole, although some slight overpricing is found for certain industry subsamples. These findings are in sharp contrast to the pervasive evidence from previous studies that document significantly positive initial returns for common stock initial offerings.