Wealth Transfer Effects between Stockholders and Bondholders

Björn Imbierowicz, Mark Wahrenburg

Research output: Contribution to journalJournal articleResearchpeer-review


Prior research has addressed the question of whether certain events cause a transfer of wealth between stockholders and bondholders but does not control for the events’ impacts on firms’ credit risk. This may explain why many studies fail to identify wealth transfers. By employing announcements of reductions in credit quality, we find that two types of events cause wealth transfers from bondholders to stockholders. These are unexpected increases in firm leverage, and the firms’ contemporaneous involvement in M&A. Both cases reveal positive excess stock returns and CDS premiums, which exhibit a significantly positive correlation.
Original languageEnglish
JournalThe Quarterly Review of Economics and Finance
Issue number1
Pages (from-to)23–43
Publication statusPublished - 2013
Externally publishedYes


  • Credit default swaps
  • Credit ratings
  • Credit rating rationale
  • Event study
  • M&A
  • Public information
  • Surprise
  • Wealth transfers

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