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Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Why do companies issue convertible bond loans? An empirical analysis for the Canadian market
Author(s): Loncarski, Igor
ter Horst, Jenke
Veld, Chris
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Keywords: Security issuance decision
Convertible bonds
Wealth effects
Agency costs
Convertible bonds
Corporations Finance Canada
Issue Date: Sep-2008
Date Deposited: 8-Oct-2008
Citation: Loncarski I, ter Horst J & 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.
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.
DOI Link: 10.1002/cjas.64
Rights: The Publisher John Wiley & Sons does not allow systematic external distribution of this Work, however authors can distribute a free copy to a colleague for the advancement of scholarly or scientific research or study, or for coroporate informational purposes. Therefore use the request copy feature at the foot of the STORRE record to request a copy directly from the author.; This is the author's final, refereed article. this is a preprint of an article published in Canadian Journal of Administrative Sciences, 25, 3, 214, 2008. The publisher version is available at:
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