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A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?

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  • Li, Hui
  • Liu, Hong
  • Siganos, Antonios

Abstract

We focus on the stock price reaction to convertible bond offering made by financial institutions and find that the cumulative abnormal return over the three day interval around convertible bond issuance is 1.41 percentage higher than that for non-financial institutions. This result supports our hypothesis that since financials are heavily regulated, the market is less likely to assume that the issuance of convertible bond by financials signals information that are overvalued. Our results remain robust after controlling for a number of firm-, issue-, and market-specific characteristics as well as the level of short selling pressure induced by convertible bond arbitrageurs.

Suggested Citation

  • Li, Hui & Liu, Hong & Siganos, Antonios, 2016. "A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 356-366.
  • Handle: RePEc:eee:finana:v:45:y:2016:i:c:p:356-366
    DOI: 10.1016/j.irfa.2014.06.004
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    Cited by:

    1. Guglielmo Maria Caporale & Woo-Young Kang, 2019. "On the preferences of CoCo bond buyers and sellers: a logistic regression analysis," CESifo Working Paper Series 7551, CESifo Group Munich.
    2. Liao, Qunfeng & Mehdian, Seyed & Rezvanian, Rasoul, 2017. "An examination of investors’ reaction to the announcement of CoCo bonds issuance: A global outlook," Finance Research Letters, Elsevier, vol. 22(C), pages 58-65.

    More about this item

    Keywords

    Convertible bond announcement effect; Financials; Regulation;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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