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Callable Bonds Revisited

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  • John C. Banko
  • Lei Zhou

Abstract

"In light of the dramatic changes in the callable bond market, we reexamine the determinants of callable bonds. Using data from 1980-2003, we find that callable bonds are often issued by firms with both information asymmetry and underinvestment problems. However, risk-shifting does not appear to be a major factor. Furthermore, we find that interest rate hedging is an important factor for investment-grade bonds and when interest rates are high but not so for below-investment-grade bonds or when rates are low." Copyright (c) 2010 Financial Management Association International.

Suggested Citation

  • John C. Banko & Lei Zhou, 2010. "Callable Bonds Revisited," Financial Management, Financial Management Association International, vol. 39(2), pages 613-641, June.
  • Handle: RePEc:bla:finmgt:v:39:y:2010:i:2:p:613-641
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    Cited by:

    1. Yagi, Kyoko & Takashima, Ryuta, 2012. "The impact of convertible debt financing on investment timing," Economic Modelling, Elsevier, vol. 29(6), pages 2407-2416.
    2. repec:eee:corfin:v:45:y:2017:i:c:p:176-202 is not listed on IDEAS
    3. Liu, Chinpiao & Chen, An-Sing, 2015. "Do firms use dividend changes to signal future profitability? A simultaneous equation analysis," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 194-207.
    4. Choi, Seungmook & Jameson, Mel & Jung, Mookwon, 2013. "The issuance of callable bonds under information asymmetry," Journal of Empirical Finance, Elsevier, vol. 21(C), pages 1-14.
    5. repec:eee:corfin:v:46:y:2017:i:c:p:442-460 is not listed on IDEAS

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