Influence of Bond Repurchases on Market Stock Price: Evidence from Russian and European Markets

Abstract

Goals: examine the influence of bond repurchase announcements on market stock price. Tasks: • to study what drives companies to tender their outstanding bonds before maturity; • to compile research sample comprising of companies` bond repurchases announced and executed by European and Russian companies in the period 2004-2012; • to investigate whether bond tender offers and open market repurchases influence market stock price inducing abnormal returns based on event study analysis. Main results: Research, focused on bond repurchases executed by European and Russian companies showed statistically significant positive cumulative equity announcement returns. The master thesis was designed in the way to apply the most recent data of growing European and Russian markets in terms of bond buybacks, covering 2004–2012 period which represents the full economic cycle with recession, severe financial crisis and tremendous expansion of economy after crisis time. Three bond buyback types were found out, namely debt-reducing bond repurchases, refinancing deals and ownership change deals. Bond repurchases with the primary objective to decrease leverage induced a higher abnormal stock returns over two event windows (-1; +3) and (-5; +5) than bond buybacks aimed to refinance a new corporate debt issuance.