Bonds with either fixed price or make whole call provisions allow for the efficient recontracting of claims, but they differ in terms of their ability to mitigate debt agency costs. Controlling for the influence of bondholder-shareholder conflicts on both the level of covenant protection and selection of a particular type of call provision, we show that firms select call provisions with greater sensitivity to changes in the option-free value of the bond when agency problems are more severe. Our findings are consistent with the Barnea, Haugen and Senbet (1980) theorem that firms select fixed price callable debt to mitigate bondholder-shareholder conflicts.

Abstract Fractional trading (FT)—the ability to trade less than a whole share—removes barriers to high-priced stocks and facilitates entry by capital-constrained retail investors. We observe a surge of tiny trades, measured using off-exchange one-share trades, among high-priced stocks compared to low-priced stocks after FT is introduced to the U.S. equity markets. These tiny trades, when coordinated during attention-grabbing events, are forceful enough to exert large price pressure on high-priced stocks. Further evidence suggests that FT can even fuel meme-stock-like trading frenzies and bubbles in high-priced stocks, for which the feedback effect likely plays a role. (JEL G10, G12, G14, G18, G32, G41)