An examination of the price reaction to the announcement of bond issues by Johannesburg Stock Exchange listed companies on the Bond Exchange of South Africa

Abstract

This paper examines the effect of straight debt announcements on the daily stock returns of Johannesburg Stock Exchange (JSE) listed companies, on The Bond Exchange of South Africa (BESA), during the period 2000 to 2008. The study is an event study that uses the market model to generate expected returns. The average abnormal returns are standardised by their time series standard errors of regression and tested for significance by the t-test. The evidence indicates that the null hypothesis should not be rejected. Furthermore, the study is examined within the context of contemporary capital structure theory.