Do bond-issuing firms attempt to choose the call, sinking fund, and term-to-maturity features of bonds to improve shareholder wealth? This paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model. The model is estimated on a sample of bonds issued between 1982 and 1986. Model estimates show that a bond's call, sinking fund, and term-to-maturity features are statistically related to the issuing firm's retention ratio, ratio of convertible to long-term debt, two-year change in net operating income, and whether the firm is listed on the NYSE and included in the S P400. These findings support the view that firms financing highquality projects, but facing information asymmetries, choose shorter-term (medium-term) callable bonds with and without the sinking fund feature.
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Volume (Year): 26 (1991) Issue (Month): 02 (June) Pages: 201-222 Download reference. The following formats are available: HTML
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