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THE MARKET REACTION TO STRAIGHT DEBT ISSUES: THE EFFECTS OF FREE CASH FLOW
Author(s) -
Howton Shawn D.,
Howton Shelly W.,
Perfect Steven B.
Publication year - 1998
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1998.tb00681.x
Subject(s) - debt , cash flow , monetary economics , free cash flow , investment (military) , economics , cash , business , finance , politics , political science , law
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.