Do bondholders receive benefits from bank interventions?

Yili Lian

Research output: Contribution to journalArticle

Abstract

Purpose: The purpose of this study is to examine the effect of bank interventions on bond performance in relation to loan covenant violations. Design/methodology/approach: This paper tests the following questions: do bondholders receive benefits from bank interventions? Is bond performance related to the probability of bank interventions? Is the turnover of a chief executive officer (CEO) associated with bank interventions and bond performance? Abnormal bond returns, the difference between bond returns and matched bond index returns are used to measure bond performance. An estimated outstanding loan balance is used to measure the probability of bank interventions. CEO turnover is identified from proxy statements and categorized into forced and voluntary CEO turnovers. Event studies and regression analysis were used to answer the above research questions. Findings: This paper finds that both short-term and long-term bond returns increase after covenant violations, bond performance is positively related to the probability of bank interventions, forced CEO turnovers are positively associated with the probability of bank interventions and firms with forced CEO turnovers tend to have superior bond performance. Originality/value: This paper is the first to explore the relation between bank interventions and bond performance.

Original languageEnglish (US)
Pages (from-to)177-197
Number of pages21
JournalReview of Accounting and Finance
Volume17
Issue number2
DOIs
StatePublished - Jan 1 2018

Fingerprint

Bondholders
Turnover
Chief executive officer
Bond returns
Loans
Covenant
Violations
Event study analysis
Design methodology
Regression analysis

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics, Econometrics and Finance(all)

Cite this

@article{46d175fa631b46cd8d9cdb9c1215a64c,
title = "Do bondholders receive benefits from bank interventions?",
abstract = "Purpose: The purpose of this study is to examine the effect of bank interventions on bond performance in relation to loan covenant violations. Design/methodology/approach: This paper tests the following questions: do bondholders receive benefits from bank interventions? Is bond performance related to the probability of bank interventions? Is the turnover of a chief executive officer (CEO) associated with bank interventions and bond performance? Abnormal bond returns, the difference between bond returns and matched bond index returns are used to measure bond performance. An estimated outstanding loan balance is used to measure the probability of bank interventions. CEO turnover is identified from proxy statements and categorized into forced and voluntary CEO turnovers. Event studies and regression analysis were used to answer the above research questions. Findings: This paper finds that both short-term and long-term bond returns increase after covenant violations, bond performance is positively related to the probability of bank interventions, forced CEO turnovers are positively associated with the probability of bank interventions and firms with forced CEO turnovers tend to have superior bond performance. Originality/value: This paper is the first to explore the relation between bank interventions and bond performance.",
author = "Yili Lian",
year = "2018",
month = "1",
day = "1",
doi = "10.1108/RAF-09-2016-0148",
language = "English (US)",
volume = "17",
pages = "177--197",
journal = "Review of Accounting and Finance",
issn = "1475-7702",
publisher = "Emerald Group Publishing Ltd.",
number = "2",

}

Do bondholders receive benefits from bank interventions? / Lian, Yili.

In: Review of Accounting and Finance, Vol. 17, No. 2, 01.01.2018, p. 177-197.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Do bondholders receive benefits from bank interventions?

AU - Lian, Yili

PY - 2018/1/1

Y1 - 2018/1/1

N2 - Purpose: The purpose of this study is to examine the effect of bank interventions on bond performance in relation to loan covenant violations. Design/methodology/approach: This paper tests the following questions: do bondholders receive benefits from bank interventions? Is bond performance related to the probability of bank interventions? Is the turnover of a chief executive officer (CEO) associated with bank interventions and bond performance? Abnormal bond returns, the difference between bond returns and matched bond index returns are used to measure bond performance. An estimated outstanding loan balance is used to measure the probability of bank interventions. CEO turnover is identified from proxy statements and categorized into forced and voluntary CEO turnovers. Event studies and regression analysis were used to answer the above research questions. Findings: This paper finds that both short-term and long-term bond returns increase after covenant violations, bond performance is positively related to the probability of bank interventions, forced CEO turnovers are positively associated with the probability of bank interventions and firms with forced CEO turnovers tend to have superior bond performance. Originality/value: This paper is the first to explore the relation between bank interventions and bond performance.

AB - Purpose: The purpose of this study is to examine the effect of bank interventions on bond performance in relation to loan covenant violations. Design/methodology/approach: This paper tests the following questions: do bondholders receive benefits from bank interventions? Is bond performance related to the probability of bank interventions? Is the turnover of a chief executive officer (CEO) associated with bank interventions and bond performance? Abnormal bond returns, the difference between bond returns and matched bond index returns are used to measure bond performance. An estimated outstanding loan balance is used to measure the probability of bank interventions. CEO turnover is identified from proxy statements and categorized into forced and voluntary CEO turnovers. Event studies and regression analysis were used to answer the above research questions. Findings: This paper finds that both short-term and long-term bond returns increase after covenant violations, bond performance is positively related to the probability of bank interventions, forced CEO turnovers are positively associated with the probability of bank interventions and firms with forced CEO turnovers tend to have superior bond performance. Originality/value: This paper is the first to explore the relation between bank interventions and bond performance.

UR - http://www.scopus.com/inward/record.url?scp=85047927448&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85047927448&partnerID=8YFLogxK

U2 - 10.1108/RAF-09-2016-0148

DO - 10.1108/RAF-09-2016-0148

M3 - Article

VL - 17

SP - 177

EP - 197

JO - Review of Accounting and Finance

JF - Review of Accounting and Finance

SN - 1475-7702

IS - 2

ER -