The Rise of Populist Parties in Europe
The Rise of Populist Parties in Europe: The Dark Side of Globalisation and Technological Change? Is the increasing strength of populist parties due to economic causes?…
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The Political Economy of the European Banking Union
The Political Economy of the European Banking Union Junior Professorship Lena Tonzer, PhD: The Political Economy of the European Banking Union: Causes for National Differences in…
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MULTIMSPROD/MULTIMSPROD AUT
MULTIMSPROD/MULTIMSPROD AUT MULTIMSPROD = Enhancing the Micro Foundation of the Research Output of National Productivity Board (NPBs). Using CompNet and Expanding its Micro Data…
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Privacy
Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
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Directions to the IWH
Directions to the IWH Halle Institute for Economic Research - Member of the Leibniz Association Kleine Märkerstraße 8 D-06108 Halle (Saale) Das IWH bei Google Maps Tel +49 345…
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Membership
Membership Five Good Reasons for Becoming a Member of the Halle Institute for Economic Research (IWH) The Halle Institute for Economic Research (IWH) - Member of the Leibniz…
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Income and savings
Income and savings Primary income of the private households The primary income of the private households (including private non-profit organisations) includes the income from…
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Population and labour market
Population and labour market Inhabitants are all people (Germans and foreigners) with permanent residence in federal territory (or in a Land). That does not include members of…
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Logo and Colours
IWH Logo and IWH Colours 1. Logo 1.1 Combined Word Picture Mark 1.2 Reduced Versions 1.2.1 Signet 1.2.2 Horizontal Versions 1.2.3 Negative Versions 2. IWH Colours 1. Logo 1.1…
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Poison Bonds
Shuo Xia, Rex Wang Renjie
SSRN Discussion Paper,
2023
Abstract
This paper documents the rise of "poison bonds", which are corporate bonds that allow bondholders to demand immediate repayment in a change-of-control event. The share of poison bonds among new issues has grown substantially in recent years, from below 20% in the 90s to over 60% after 2005. This increase is predominantly driven by investment-grade issues. We provide causal evidence that the pressure to eliminate poison pills has led firms to issue poison bonds as an alternative. Further analyses suggest that this practice entrenches incumbent managers, coincidentally benefits bondholders, but destroys shareholder value. Holding a portfolio of firms that remove poison pills but promptly issue poison bonds results in negative abnormal returns of -7.3% per year. Our findings have important implications for understanding the agency benefits and costs of debt: (1) more debt does not necessarily discipline the management; and (2) even without financial distress, managerial entrenchment can lead to conflicts between shareholders and creditors.
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