Loncarski, I., Ter Horst, J. and Veld, C. (2008) Why do companies issue convertible bond loans? An empirical analysis for the Canadian market. Canadian Journal of Administrative Sciences, 25(3), pp. 214-236. (doi: 10.1002/cjas.64)
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Publisher's URL: http://dx.doi.org/10.1002/cjas.64
Abstract
To identify issuer motives, we study the determinants of announcement effects of convertible debt issues in the Canadian market. Classified into equity- and debt-like, wealth effects are significantly more negative for equity-like convertible bond issuers. Equity-like convertibles are significantly negatively affected by agency costs of equity. However, agency costs of debt have no significant effect on debt-like convertibles. Consistent with Stein (1992), this suggests convertibles in particular represent a substitute for equity. Moreover, convertible debt offers announced by income trusts experience significantly less negative wealth effects than offers by nontrusts—a finding explained by a more debt-like convertible design, very low agency costs of equity in case of income trusts, or both.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Veld, Professor Chris |
| Authors: | Loncarski, I., Ter Horst, J., and Veld, C. |
| Subjects: | H Social Sciences > HG Finance |
| College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
| Journal Name: | Canadian Journal of Administrative Sciences |
| ISSN: | 0825-0383 |
| ISSN (Online): | 1936-4490 |
| Published Online: | 21 August 2008 |
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