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Corporate Restructuring and Bondholder Wealth


  • Luc Renneboog,

    1. Tilburg University and ECGI, Department of Finance, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands
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      Luc Renneboog acknowledges financial support from the European Commission via the ‘New Modes of Governance’ project (NEWGOV) led by the European University Institute in Florence (Contract No. CIT1-CT-2004–506392) and from the Netherlands Organization for Scientific Research (‘Shifts in Governance’ Programme). Peter G. Szilagyi is grateful for funding from the European Commission through the European Corporate Governance Training Network (ECGTN). We wish to thank John Doukas (the editor), Jonathan Batten, Fabio Braggion, Hans Degryse, Guillaume Dufay, Piet Duffhues, Igor Loncarski, Marina Martynova, Colin Mayer, Joe McCahery, Maria Fabiana Penas, Paolo Volpin, Chendi Zhang and an anonymous referee for providing useful comments and suggestions. We have benefited from the helpful comments of seminar participants at Tilburg University.

  • Peter G. Szilagyi

    1. Judge Business School, University of Cambridge, Trumpington Street, Cambridge CB2 1AG, UK E-mail:
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This paper provides an overview of existing research on how corporate restructuring affects bondholder wealth. Restructuring is defined as any transaction which affects the firm's riskiness by changing its underlying capital structure. Thus, it reaches well beyond asset restructuring and includes transactions such as leveraged buyouts, security issues and exchanges, and the issuance of stock options. We identify significant gaps in the literature, emphasize the potential differences in bond performance between market- and stakeholder-oriented corporate governance systems, and provide valuable insights into methodological advances. We find that many issues remain as the empirical evidence is often inconclusive and focuses almost exclusively on the US. Research on other countries remains constrained by the lesser development of their bond markets, but is equally imperative because the position and bargaining power of creditors vis-à-vis the firm differ substantially across countries and governance regimes.