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Comment: Convertible Debt Financing

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  • Livingston, Miles

Abstract

A student of financial theory must always assume that managers will follow a course of action that will lead to a higher value of the firm rather than a lower value, given a choice between two courses of action. Yet, Lewellen and Racette (hereafter LR) in a recent paper [1] comparing the sale of convertible debentures with the sale of straight debt assumed that managers will behave in a way that will lead to submaximal firm value. The purpose of this paper is to correct the LR error.

Suggested Citation

  • Livingston, Miles, 1977. "Comment: Convertible Debt Financing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(3), pages 515-518, September.
    • Handle: RePEc:cup:jfinqa:v:12:y:1977:i:03:p:515-518_02
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