WEALTH TRANSFER BETWEEN OWNERS AND LENDERS OF EUROPEAN STOCK CORPORATIONS

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Andreas Horsch, Steffen Hundt, Björn Sprungk

DOI:10.22495/cocv14i2c1p1

Abstract

Wealth transfer effects between company owners and lenders based on changes in a firm’s credit rating have primarily been examined a) for one type of security; b) on U.S. capital markets; and c) by applying standard event study methods. In contrast to these studies, we compared the price effects of stocks and corporate bonds of the same issuer using robust event study methods. Our findings indicated that downgrades cause negative price effects for owners and lenders of European firms, whereas upgrades only induced positive price effects for lenders. However, we did not find evidence for the existence of wealth transfer effects between owners and lenders on European capital markets.

Keywords: Credit Ratings, Event Study, Rating Agencies, Wealth Transfer Effects, Robust Regression

JEL classification: G14, G15, G24, G32, G34

Date received: 11 October 2016

Date accepted: 5 January 2017

How to cite this paper: Hundt, S., Sprungk, B., & Horsch, A. (2017). Wealth transfer between owners and lenders of European stock corporations. Corporate Ownership & Control, 14(2-1), 147-164. http://doi.org/10.22495/cocv14i2c1p1