The long-run performance of stock returns following debt o!erings

  • Wayne Mikkelson, Megan Partch, Paula Tkac, Daniel Spieß, John Aeck-Graves
  • Published 1999


We document substantial long-run post-issue underperformance by "rms making straight and convertible debt o!erings from 1975 to 1989. This long-run underperformance is more severe for smaller, younger, and NASDAQ-listed "rms, and for "rms issuing speculative grade debt. We also "nd strong evidence that the underperformance of issuers of both straight and convertible debt is limited to those issues that occur in periods with a high volume of issues. In contrast to earlier event studies that found insigni"cantly negative abnormal returns at the time of debt issue announcements and concluded that debt o!erings had no impact on shareholder wealth, our results suggest that debt o!erings, like equity o!erings, are signals that the "rm is overvalued. As with equity o!erings and repurchases, the market appears to underreact at the time of the debt o!ering announcement so that the full impact of the o!ering is only realized over a longer time horizon. ( 1999 Elsevier Science S.A. All rights reserved. JEL classixcation: G14; G32

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Cite this paper

@inproceedings{Mikkelson1999TheLP, title={The long-run performance of stock returns following debt o!erings}, author={Wayne Mikkelson and Megan Partch and Paula Tkac and Daniel Spie\ss and John Aeck-Graves}, year={1999} }