Determinants of bondholder wealth effects in corporate restructurings: evidence from spin-offs as compared to mergers and acquistions

dc.contributor.advisorParrino, Roberten
dc.contributor.advisorStarks, Laura T.en
dc.creatorChandra, Shilpa Mahajanen
dc.description.abstractThis dissertation investigates the effects of mergers and acquisitions and spin-offs on the firm and its debtholders. This paper analyzes changes in the firm characteristics including capital structure, business risks, and operating performance. I develop a theoretical model that predicts the relationship between cross-sectional firm characteristics and the changes in wealth of the original bondholders (of the parent/acquirer firms) that have publicly traded outstanding nonconvertible debt at the time of a spin-off and merger/acquisition respectively. The empirical analysis shows wealth effects on the original bondholders of the parent/acquirer firm. Monthly bond returns are calculated relative to the announcement date for a sample of firms that have undertaken a spin-off or merger/acquisition. The results show a cross-sectional variation in the reaction to the announcement. The cross-sectional firm characteristics that determine the magnitude of these effects are identified. A parent firm’s pre-spin-off leverage, change in leverage, and change in operating efficiency as a result of the spin-off are important determinants of wealth distribution to bondholders in these corporate restructurings. The results of this study provide evidence that different value drivers, depending on the type of restructuring, determine bondholder wealth effects. In spin-offs, the leverage effect is the predominant determinant of bondholder wealth. In mergers and acquisitions, the change in business risks primarily influences the effect of the merger on bondholder wealth. Bondholders gain more in focus-increasing spin-offs and in focus-preserving (nonconglomerate) mergers.
dc.description.departmentBusiness Administrationen
dc.rightsCopyright is held by the author. Presentation of this material on the Libraries' web site by University Libraries, The University of Texas at Austin was made possible under a limited license grant from the author who has retained all copyrights in the works.en
dc.subject.lcshConsolidation and merger of corporations--Economic aspectsen
dc.titleDeterminants of bondholder wealth effects in corporate restructurings: evidence from spin-offs as compared to mergers and acquistionsen
dc.type.genreThesisen Administrationen Administrationen University of Texas at Austinen of Philosophyen

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