Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1018376 | Journal of Business Research | 2009 | 6 Pages |
Abstract
In this paper we investigate whether the terms used in the design of a convertible debt issue act as a signal of the issuing firm's future growth prospects. Our general premise is that convertible debt design terms are interrelated and arranged in a manner that signals asymmetric information to market participants. Empirical tests support our hypothesis, even after controlling for risk, firm size, time-to-maturity, and industry effects. Firms issuing convertible debt that arrange terms to take advantage of relatively better future growth prospects are found to have a relatively lower negative price reaction around the announcement of the offer.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Mookwon Jung, Michael J. Sullivan,