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To Call or Not To Call Convertible Debt

Author

Listed:
  • Louis H. Ederington
  • Gary L. Caton
  • Cynthia J. Campbell

Abstract

Calls of in-the-money convertible bonds appear to be consistent with the yield advantage, after-tax-cash-flow and safety-premium hypotheses. However, this study does not find any support for the signaling hypothesis or for the often-cited desire on the part of management to extinguish the bondholders' conversion option.

Suggested Citation

  • Louis H. Ederington & Gary L. Caton & Cynthia J. Campbell, 1997. "To Call or Not To Call Convertible Debt," Financial Management, Financial Management Association, vol. 26(1), Spring.
    • Handle: RePEc:fma:fmanag:ederington97
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    Cited by:

    1. King, Tao-Hsien Dolly & Mauer, David C., 2014. "Determinants of corporate call policy for convertible bonds," Journal of Corporate Finance, Elsevier, vol. 24(C), pages 112-134.
    2. Bruce D. Grundy & Patrick Verwijmeren, 2012. "Dividend-Protected Convertible Bonds and the Disappearance," Tinbergen Institute Discussion Papers 12-060/2/DSF37, Tinbergen Institute.
    3. Bechmann, Ken L., 2004. "Short sales, price pressure, and the stock price response to convertible bond calls," Journal of Financial Markets, Elsevier, vol. 7(4), pages 427-451, October.
    4. Duffie, Darrell, 2005. "Credit risk modeling with affine processes," Journal of Banking & Finance, Elsevier, vol. 29(11), pages 2751-2802, November.
    5. repec:bla:finmgt:v:36:y:2007:i:2:p:1-21:1 is not listed on IDEAS
    6. Koziol, Christian & Roßmann, Philipp, 2022. "Contingent convertible bonds: Optimal call strategy and the impact of refinancing," Journal of Corporate Finance, Elsevier, vol. 77(C).
    7. Bajo, Emanuele & Barbi, Massimiliano, 2012. "The role of time value in convertible bond call policy," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 550-563.
    8. Sarkar, Sudipto, 2003. "Early and late calls of convertible bonds: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 27(7), pages 1349-1374, July.

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