Firms can adjust their convertibles to be more debt-like or equity-like through several contract terms. In particular, by providing call protection, a convertible issuer can assure its convertible bondholders that it will not force them to become equity holders during the call protection period. The possibility of a forced conversion instituted by an early call should be more threatening to investors in an economy where local laws are biased against shareholders. I examine call protection terms in an international sample and find evidence consistent with the hypothesis that convertible bond design varies based on the features of local law.

If firms issue convertible securities to facilitate sequential investment, the securities should be engineered to give sufficient flexibility to accommodate timing of follow‐on investment. We examine call provisions in convertible bonds and argue that firms with investment options expected to expire sooner (later) will offer weaker (stronger) call protection. We find that issues with weak or no call protection are offered by firms that invest greater amounts soon after issuance than those issuing convertibles with strong protection. Moreover, capital expenditure levels during the 5‐year period following issuance are inversely related to the length of call‐protection periods.