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On the Pricing of Preferred Stock

Author

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  • Sorensen, Eric H.
  • Hawkins, Clark A.

Abstract

Historically, preferred stock ranks well below common stock and bond issues as a source of financing in the private capital market. Relative to issuance of bonds, the issuance of preferred stock burdens the issuer with a fixed financing cost without benefitingthe issuer with the tax deductability associated with interest payments.

Suggested Citation

  • Sorensen, Eric H. & Hawkins, Clark A., 1981. "On the Pricing of Preferred Stock," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(4), pages 515-528, November.
    • Handle: RePEc:cup:jfinqa:v:16:y:1981:i:04:p:515-528_00
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    Cited by:

    1. Wallace N. Davidson III & John L. Glascock, 1985. "The Announcement Effects Of Preferred Stock Re-Ratings," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(4), pages 317-325, December.
    2. Iraj Fooladi & Gordon S. Roberts, 1986. "On Preferred Stock," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 9(4), pages 319-324, December.
    3. Rodolfo Apreda, 2004. "Enhancing corporate governance with one-and two-tiered convertible preferred stock," CEMA Working Papers: Serie Documentos de Trabajo. 260, Universidad del CEMA.
    4. Donald J. Stokes & Michael J. Whincop, 1993. "Covenants and Accounting Information in the Market for Classes of Preferred Stock," Contemporary Accounting Research, John Wiley & Sons, vol. 9(2), pages 463-478, March.

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