de Jong, A., Dutordoir, M. and Verwijmeren, P. (2011) Why do convertible issuers simultaneously repurchase stock? An arbitrage-based explanation. Journal of Financial Economics, 100(1), pp. 113-129. (doi: 10.1016/j.jfineco.2010.10.016)
Full text not currently available from Enlighten.
Publisher's URL: http://dx.doi.org/10.1016/j.jfineco.2010.10.016
Abstract
Over recent years, a substantial fraction of US convertible bond issues have been combined with a stock repurchase. This paper explores the motivations for these combined transactions. We argue that convertible debt issuers repurchase their stock to facilitate arbitrage-related short selling. In line with this prediction, we show that convertibles combined with a stock repurchase are associated with lower offering discounts, lower stock price pressure, higher expected hedging demand, and lower issue-date short selling than uncombined issues. We also find that convertible arbitrage strategies explain both the size and the speed of execution of the stock repurchases.
Item Type: | Articles |
---|---|
Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Verwijmeren, Professor Patrick |
Authors: | de Jong, A., Dutordoir, M., and Verwijmeren, P. |
College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
Journal Name: | Journal of Financial Economics |
ISSN: | 0304-405X |
Published Online: | 27 October 2010 |
University Staff: Request a correction | Enlighten Editors: Update this record