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Repurchases of Bonds through Tender Offers: Implications for Shareholder Wealth

Gene Laber
Financial Management
Vol. 7, No. 2 (Summer, 1978), pp. 7-13
Published by: Wiley on behalf of the Financial Management Association International
Stable URL: http://www.jstor.org/stable/3665237
Page Count: 7
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Repurchases of Bonds through Tender Offers: Implications for Shareholder Wealth
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Abstract

In early 1977, four Bell System subsidiaries made tender offers for outstanding high-coupon bonds that were protected from call for two or three years, offers exceeding market prices of the bonds by about $30. Other companies continued another non-traditional refunding activity that became popular in the early 1970s, repurchasing low-coupon bonds selling at discounts. This practice has been marked by controversy, because the paper "gains" on such purchases are treated as profit on income statements. The major focus of this paper is examination of the implications of these non-traditional refunding techniques on shareholder wealth.

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