This study examines the effects of poison put/call covenants on the reoffering yields of corporate bonds issued during 1986 through 1990. The analysis controls for possible biases due to the ...endogeneity of the decision to issue the bond and the decision to include a poison covenant. The findings indicate that the presence of a single poison call provision has a positive effect on the yield differential, increasing the yield by up to 54 basis points. This is consistent with the managerial entrenchment hypothesis. On the other hand, the inclusion of a poison put provision reduces the yield by 58 to 78 basis points. Furthermore, we find that the imposition of an additional stringent provision to transfer a simple poison put to a super poison put does not significantly decrease the yields further.
The primary purpose of this study is to investigate the impact on the market value of pharmaceutical companies of FDA decisions on new drug applications. On average, these firms gain market value ...surrounding these announcements. However, the share price response to positive and negative decisions is asymmetrical; the market reaction to negative decisions is of greater magnitude than that for positive decisions. Based upon the high approval rate for NDAs, market participants bid up the stock prices of companies with drugs under review prior to the FDA decisions. Subsequent approval announcements are, thus, partially anticipated events, and the reaction to the actual announcements is somewhat subdued. Accordingly, a negative decision surprises the market, and the reaction is much more dramatic. Splitting the sample into several subsamples based on various characteristics of the drugs and the companies yields some interesting results.
