Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/147672
Title: THE IMPACT OF DEBT REPURCHASES ON FIRM PERFORMANCE, STOCK RETURNS AND BOND RETURNS
Authors: YEO YONG HUI
Issue Date: 2012
Citation: YEO YONG HUI (2012). THE IMPACT OF DEBT REPURCHASES ON FIRM PERFORMANCE, STOCK RETURNS AND BOND RETURNS. ScholarBank@NUS Repository.
Abstract: There are three separate repurchase factors to consider for debt repurchases - the reason, source of funding and method of repurchase. This paper fills the void in the debt repurchase literature by analysing the impact of these various repurchase factors on the firm’s post-event operating performance as well as stock and bond returns. Firms exhibit improved operating performance after the repurchase event. However, after controlling for firm characteristics, I find that the repurchase factors are not able to explain and predict the post-event operating performance of the firm. There is evidence of both the signalling and wealth transfer hypothesis for stock and bond returns around the debt repurchase event. For the entire sample, both securities exhibit positive abnormal returns around the repurchase announcement, suggesting evidence of the signalling hypothesis. However, when the repurchase is funded by equity, positive bond returns and negative equity returns are observed, suggesting evidence of the wealth transfer effect. Furthermore, I find that even after controlling for stock and bond characteristics, the repurchase factors continue to exhibit explanatory power for the observed stock and bond CARs. This shows that the abnormal returns for both stocks and bonds are indeed attributable to the repurchase factors.
URI: http://scholarbank.nus.edu.sg/handle/10635/147672
Appears in Collections:Bachelor's Theses

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