Convertible Bond Financing: Are Some Issuers Mimickers?
This study examines whether firms issuing convertible bonds that do not infuse a firm's capiatl structure with equity mimic higher quality firms at offer announcement. Our evidence indicates that, prior to offer announcement, "mimicking" firms are smaller, riskier, less profitable, have lower market-to-book ratios, and more information asymmetry than non-mimicking firms. However, the convertible bonds issues by the two types of firms are indistinguishable. Offer announcements by mimicking firms result in a non-negative change in wealth, while wealth declines significantly for non-mimicking firms. The difference in wealth change is statistically significant.
Year of publication: |
1996
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Authors: | Bhabra, Harjeet S. ; Patel, Ajay |
Published in: |
Financial Management. - Financial Management Association - FMA. - Vol. 25.1996, 4
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Publisher: |
Financial Management Association - FMA |
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