Journal of Financial Economics Vol. 29 No. 1 1991
Underwritten calls of convertible bonds
Abstract
Common-stock prices fall a statistically significant 2 percent in response to underwritten convertible debt call announcements. We find that the significant negative price reaction is confined to underwritten calls — stock-price responses to non-underwritten calls average an insignificant −0.84 percent. The results support the idea that managers are more likely to use underwriters the more unfavorable the information they possess about future firm cash flows. An agency cost interpretation of underwritten calls is also consistent with the results, but is not supported by management ownership and corporate liquidity evidence.
- DOI
- 10.1016/0304-405x(91)90018-f
- Volume
- 29
- Issue
- 1
- Pages
- 173-196
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref