Is it worthwhile to augment the legal protection of public debt placed by privately held companies?

Keren Bar Hava, Roi Katz, Beni Lauterbach

Research output: Contribution to journalReview articlepeer-review

Abstract

We examine the effects of a law amendment in Israel in 2011 that imposes a set of minimum corporate governance standards on privately held firms that issue publicly traded bonds. Two main results emerge. First, consistent with US evidence, the improved bondholder protection boosts the immediate market valuation of private firms' bonds. Second, the amendment suppresses the private bonds market. After the amendment enactment, the number of private bond IPOs decreases sharply, and an extraordinary proportion of private firms redeem their existing public bonds early. However, given that the exiting firms had more related party transactions, it can be argued that the amendment increases market quality.

Original languageEnglish
Pages (from-to)67-101
Number of pages35
JournalJournal of Law, Finance, and Accounting
Volume4
Issue number1
DOIs
StatePublished - 1 Jan 2019

Keywords

  • Corporate governance improvements
  • Public bonds of privately held companies
  • Regulatory reforms in bond markets

Fingerprint

Dive into the research topics of 'Is it worthwhile to augment the legal protection of public debt placed by privately held companies?'. Together they form a unique fingerprint.

Cite this