Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 2008 erstellt
Description:
Change-in-control covenants were first introduced at the tail-end of the LBO wave in the 1980s. We report that, like bondholders in the 1980s, bondholders lacking such covenant protection experience significantly negative wealth effects of -6.76% upon the announcement of an LBO, compared to 2.30% for bonds with protection. Furthermore, we document that firms with bonds lacking change-in-control covenants are twice as likely to be the target of an LBO. Thus, the potential for bondholder wealth expropriation plays an important role in both the design of bond contracts and the identification of suitable LBO targets