How do investors perceive convertible bond issuance decisions?

Marie Dutordoir, Chris Veld, Yulia Veld-Merkoulova

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We survey institutional investors on the convertible bond issuance decision. Investors believe that convertibles are preferred over equity in order to avoid equity dilution. We also find support for traditional convertible bond issuing theories, such as the backdoor equity, sequential financing, risk shifting, and risk disagreement models. Investors attribute little importance to factors that make convertible bonds more attractive for hedge funds such as volatility and dividend payments on the underlying stocks. This latter result is likely related to the smaller role that convertible arbitrage activity started to play in this marke
Original languageEnglish
Article number102035
JournalFinance Research Letters
Volume44
Issue numberJanuary 2022
DOIs
Publication statusPublished - 2022
Externally publishedYes

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