Callable Convertible Bonds in Sequential Financing: Evidence on the Western European Market

Abstract : The objective of the paper is to test empirically the Mayers (1998) sequential financing hypothesis stating that companies issue callable convertible debt to overcome the problem of overinvestment (Jensen, 1986) that could arise in a sequential investment setting. As a result of this theory we should observe higher investment and financing activities at the exercise call dates especially if it is in the money. Based on a sample of 277 Callable Convertible Bonds issued by non-financial firms in Western Europe between 1994 and 2009, comprising 161 callable convertible bonds being subject to forced conversion (calling subsample) and 116 non-called convertible bonds (non-calling subsample) and using classical and difference-in-differences methodologies, we find evidence only weakly in line with the sequential financing hypothesis of Mayers (1998). For the calling firms, we, in general, do not observe significant positive changes in capital expenditure at call dates that are greater than those of the non-calling firms. We observe a significant difference in new equity issuances only for the comparison between calling and non-calling firms. Unlike Alderson et al. (2006), we find that in the money calling firms increase their investment around the convertible bonds calls more than out of the money calling firms. We also find a positive impact of the call decision on the change of the new debt issuance at the call dates.
Type de document :
Article dans une revue
Journal of Multinational Financial Management, Elsevier, In press, 〈10.1016/j.mulfin.2018.04.001〉
Liste complète des métadonnées

Littérature citée [28 références]  Voir  Masquer  Télécharger

https://halshs.archives-ouvertes.fr/halshs-01767575
Contributeur : Anne L'Azou <>
Soumis le : lundi 16 avril 2018 - 13:56:20
Dernière modification le : mardi 5 juin 2018 - 10:14:16

Fichier

 Accès restreint
Fichier visible le : 2019-04-11

Connectez-vous pour demander l'accès au fichier

Identifiants

Citation

Olivier Adoukonou, Florence André, Jean-Laurent Viviani. Callable Convertible Bonds in Sequential Financing: Evidence on the Western European Market. Journal of Multinational Financial Management, Elsevier, In press, 〈10.1016/j.mulfin.2018.04.001〉. 〈halshs-01767575〉

Partager

Métriques

Consultations de la notice

108