Disappearing call delay and dividend-protected convertible bonds

Grundy, B. D. and Verwijmeren, P. (2016) Disappearing call delay and dividend-protected convertible bonds. Journal of Finance, 71(1), pp. 195-224. (doi: 10.1111/jofi.12363)

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Firms do not historically call their convertible bonds as soon as conversion can be forced. A number of explanations for the delay rely on the size of the dividends that bondholders forgo so long as they do not convert. We investigate an important change in convertible security design, namely, dividend protection of convertible bond issues. Dividend protection means that the conversion value of the convertible bond is unaffected by dividend payments and thus dividend-related rationales for call delay become moot. We document that call delay is near zero for dividend-protected convertible bonds.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Verwijmeren, Professor Patrick
Authors: Grundy, B. D., and Verwijmeren, P.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of Finance
ISSN (Online):1540-6261
Copyright Holders:Copyright © 2015 John Wiley and Sons
First Published:First published in Journal of Finance 71(1):195-224
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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