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Systematic risk variations (beta) convertible debenture brazilian companies

  • Renata Drumond Pinto Coelho Antonino

    (PRODABEL)

  • Wagner Moura Lamounier

    (Federal University of Minas Gerais - UFMG)

  • Roberto Kaehler de Albuquerque Maranhão

    (Independent Consultant)

Registered author(s):

    The purpose of this article is to analyze the impact of issuing convertible debentures on the systematic risk of Brazilian companies. Some applied researches in the U.S. capital market (STEIN, 1992; LEWIS et al, 2002; RAI, 2005) indicate that convertible debentures may be used as an alternative financing source when adverse selection problem makes stock issuing unattractive financing source. The analysis of Brazilian companies that issued convertible debentures recorded in the period from 1998 to 2006 and that presented liquidity on the market indicated that variation in beta, on average, is positive. These results are coherent with the signaling hypothesis and with the absence of convertible debenture issuing in 2005 and 2006 on the Brazilian market. They also may be related to the precarious financial situation of issuing companies, observed by the analysis of some financial indicators in year of issue and in two pre- e post-issuing years.

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    File URL: http://www.bbronline.com.br/public/edicoes/7_3/artigos/85bw5n8t3313122010102816.pdf
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    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 7 (2010)
    Issue (Month): 3 (September)
    Pages: 1-22

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    Handle: RePEc:bbz:fcpbbr:v:7:y:2010:i:3:p:1-22
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    1. Stein, Jeremy C., 1992. "Convertible bonds as backdoor equity financing," Journal of Financial Economics, Elsevier, vol. 32(1), pages 3-21, August.
    2. Lewis, Craig M. & Rogalski, Richard J. & Seward, James K., 2002. "Risk changes around convertible debt offerings," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 67-80, January.
    3. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    5. Atul Rai, 2005. "Changes in risk characteristics of firms issuing hybrid securities: case of convertible bonds," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(4), pages 635-651.
    6. Craig M. Lewis & Richard J. Rogalski & James K. Seward, 1998. "Understanding The Design Of Convertible Debt," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(1), pages 45-53.
    7. Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers 41, University of California at Berkeley.
    8. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    9. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
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