Changes in risk characteristics of firms issuing hybrid securities: case of convertible bonds
AbstractThe present paper examines changes in risk characteristics of a firm when it issues convertible bonds by studying the change in beta before and after the issuance of convertible bonds. Using a sample of 149 firms, strong evidence was found of change in beta, along with significant heterogeneity across firms. On average, the beta of a firm issuing convertible bonds declines, although 40 per cent of firms showed an increase in beta. A cross-sectional regression shows that after controlling for the reversion-to-mean phenomenon, the change in beta is significantly related to potential dilution of equity as well as to increase in debt, but is not significantly related to either the change in bond rating of a firm or to the stated use of funds from issuance. Copyright 2005 Accounting and Finance Association of Australia and New Zealand..
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Bibliographic InfoArticle provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting and Finance.
Volume (Year): 45 (2005)
Issue (Month): 4 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0810-5391
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- Renata Drumond Pinto Coelho Antonino & Wagner Moura Lamounier & Roberto Kaehler de Albuquerque Maranhão, 2010. "Systematic risk variations (beta) convertible debenture brazilian companies," Brazilian Business Review, Fucape Business School, vol. 7(3), pages 1-22, September.
- Zeidler, Felix & Mietzner, Mark & Schiereck, Dirk, 2012. "Risk dynamics surrounding the issuance of convertible bonds," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 273-290.
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