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Are European Convertibles More Debt-Like than the US Issues? An Empirical Analysis


  • M. Dutordoir
  • L. Van De Gucht


The popular financial press often suggests that convertible debt issued by European firms is more debt-like in nature than convertible debt issued by US firms. This paper is the first to formally test the validity of this common perception. Our evidence indicates that European convertibles are effectively structured to be more debt-like than US convertibles. We also show that European convertible debt announcements induce less negative stockholder reactions than US announcements, which is consistent with the larger debt component of the former securities. Lastly, we explore some potential explanations for the relatively more debt-like design of European convertibles. Our results indicate that this finding may be attributable to both issuer-related and institutional differences across European and US convertible debt markets.

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  • M. Dutordoir & L. Van De Gucht, 2004. "Are European Convertibles More Debt-Like than the US Issues? An Empirical Analysis," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(4), pages 533-568.
  • Handle: RePEc:ete:revbec:20040401

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    1. Bovenberg, A. Lans & Graafland, Johan J. & de Mooij, Ruud A., 2000. "Tax reform and the Dutch labor market: an applied general equilibrium approach," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 193-214, October.
    2. Donders, Jan & Graafland, Johan, 1998. "CPB models and employment policy in the Netherlands," Economic Modelling, Elsevier, vol. 15(3), pages 341-356, July.
    3. Graafland, J.J. & Huizinga, F.H., 1998. "Taxes and benefits in a non-linear wage equation," MPRA Paper 21076, University Library of Munich, Germany.
    4. Draper, D.A.G., 2000. "Towards an econometric model for the Netherlands : Explaining unemployment," Other publications TiSEM 8d6f0572-d552-4ca2-9df3-6, Tilburg University, School of Economics and Management.
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