Corporate restructurings and the effect of ownership concentration on bond recovery rates : an empirical study of recovery rates in the Norwegian high yield bond market

Abstract

This study examines the effect of ownership concentration on recovery rates for 112 defaulted high yield bonds issued by Norwegian firms. We find evidence suggesting that concentrated ownership in the hands of the firm’s largest owner negatively affects bond recovery for secured bonds. The effect is insignficant for unsecured bonds. This suggests that large shareholders reduce bond recovery rates by a transfer of value in the negotiation process during financial reorganizations. Large shareholders have greater incentive to use their bargaining power in negotiations, compared to small shareholders.