The information content of equity-for-debt swaps. An investigation of analyst forecasts of firm cash flows

Ronen Israel*, Aharon R. Ofer, Daniel R. Siegel

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Scopus citations

Abstract

We demonstrate that analysts revise their forecasts of net operating income downward following the announcement of an equity-for-debt swap. Their revisions are positively correlated with the size of the stock-price reaction to the swap announcement. This evidence supports the hypothesis that announcements of equity-for-debt swaps convey information about the expected level of cash flows of the firm. We also provide evidence that this information is about transitory changes in the expected cash flows.

Original languageEnglish
Pages (from-to)349-370
Number of pages22
JournalJournal of Financial Economics
Volume25
Issue number2
DOIs
StatePublished - Dec 1989

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