In this paper we challenge the view that corporate bonds are always arm's length debt. We analyze the effect of bond ratings on the stock price return to acquirers in M&A transactions, which tend to have significant effects on creditor wealth. We find acquirers abnormal returns to be higher if...

A great deal of academic research focuses on how bond issuance impacts the firm. Most recent research focuses on investment grade bonds and ignores noninvestment grade bonds. This article investigates the long-run stock underperformance of high-yield bond Initial Bond Offerings (IBOs) in the...