Junk bond market financing became more important in mergers and corporate restructurings because:

Question

Quizplus · Accepted Answer

Junk bond market financing allowed firms to have much higher debt-equity ratios, which helped in financing mergers and restructuring activities. This was possible because junk bonds are high-yield, high-risk securities that are rated below investment grade by credit rating agencies, which means that they have a higher probability of default. However, they offer higher returns to investors, which allowed firms to borrow large amounts of money and use it to finance their activities. This made junk bonds an attractive financing option for firms in need of capital.

Junk Bond Market Financing Became More Important in Mergers and Corporate