Are There Windows of Opportunity for Convertible Debt Issuance? Evidence for Western Europe
AbstractThis paper hypothesizes that hot convertible debt windows represent periods with lower convertible debt-related financing costs. Supporting this premise, we find that the stock price impact of Western European convertible debt announcements is significantly less negative during hot convertible windows. Importantly, this result holds while controlling for equity market, straight debt market and macroeconomic conditions. In addition, stockholders are less sensitive to issuer- and issue-specific financing costs during hot convertible markets. Overall, these findings indicate that hot convertible markets represent windows of opportunity for convertible debt issuance. Firms with high idiosyncratic financing costs act accordingly by timing their convertible offering during a hot market.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2006-055-F&A.
Date of creation: 30 Oct 2006
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Western Europe; Convertible debt; Event Study; Hot Markets;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-04 (All new papers)
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"An Empirical Analysis of Incremental Capital Structure Decisions Under Managerial Entrenchment,"
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- de Jong, Abe & Veld, Chris, 2001. "An empirical analysis of incremental capital structure decisions under managerial entrenchment," Journal of Banking & Finance, Elsevier, vol. 25(10), pages 1857-1895, October.
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