An empirical investigation of corporate bond clawbacks (IPOCs): Debt renegotiation versus exercising the clawback option
Bond clawback provisions allow the issuer to partially redeem a bond issue often within 3years of issuance using proceeds only from new equity issues. We document that clawback bonds are often renegotiated and clawbacks provisions are rarely exercised. We find that the probability of exercising the clawback option increases if the firm has lower leverage, has better return on equity, and is not issuing in the 144 market. We also find that the higher yields observed on clawback bonds are associated with the likelihood of the clawback provision being exercised. We argue that the results are consistent with the view that firms that use clawback provisions are likely to have better fundamentals. These firms exercise the clawback provision because the firm is able to access the equity markets and issue the needed equity for exercising the clawback option. Renegotiation of clawback bond results from the need to refinance the high cost IPOC issues and the difficulty accessing the equity capital markets.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:20:y:2013:i:c:p:14-21. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.