Articlegreen1996

On the Information Content of Calls of Convertible Securities

28 citations0/0 files storedThe Journal of Business

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

Negative stock price reactions to conversion-forcing calls of convertible bonds and preferred stocks are re-examined, and most of the sample firms are shown to exhibit full price recovery by the end of the conversion period. In addition, analysts' earnings forecasts, both short-term and long-term, are found to be revised upward following call announcements for convertible bonds and preferred stocks. The combined findings cast doubt on the established belief that such capital structure decisions signal negative information about firm value.

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References

1977The Determination of Financial Structure: The Incentive-Signalling Approach 1988Withdrawn Security Offerings 1987Corporate Financial Policy, Information, and Market Expectations: An Empirical Investigation of Dividends 1981Convertible calls and security returns 1985A Sequential Signalling Model of Convertible Debt Call Policy 1987Convertible call policies 1991Underwritten calls of convertible bonds 1992Liquidity Costs and Stock Price Response to Convertible Security Calls

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1997To Call or Not to Call Convertible Debt

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