Over recent years, a substantial fraction of U.S. convertible bond issues have been combined with a stock repurchase. This paper explores the motivations for these combined transactions. We argue that convertible debt issuers buy back their stock in order to facilitate short selling by...

Over recent years, a substantial fraction of U.S. convertible bond issues have been combined with a stock repurchase. This paper explores the motivations for these combined transactions. We argue that convertible debt issuers buy back their stock in order to facilitate short selling by...

Convertible arbitrageurs combine long positions in convertibles with short positions in the underlying stock. We exploit worldwide differences in short-sale constraints to examine whether convertible arbitrage short selling creates downward pressure on convertible issuers' stock prices. Using a...

While convertible offerings announced between 1984 and 1999 induce average abnormal stock returns of −1.69%, convertible announcement effects over the period 2000 to 2008 are more than twice as negative (−4.59%). We hypothesize that this evolution is attributable to a shift in the...

We show that run-ups in U.S. target firm stock returns preceding merger announcements have declined drastically over recent decades. The negative trend in target run-ups cannot be fully explained by changes in deal or target characteristics associated with merger anticipation. However, it...

Investor demand for convertible debt may change over time, due to changes in investor tastes and/or in funds available for convertible investment. We examine whether security-issuing firms cater to temporal fluctuations in investor demand for convertible debt. We find that investor demand...

Convertible debt represents an important source of financing for U.S. companies. We examine whether convertible bond issuance activity is influenced by changes in investor demand for convertible debt. We find that investor demand proxies are able to explain approximately one-third of the...

The static tradeoff theory of capital structure predicts that firms aim to approach a target debt ratio. The theory provides several firm characteristics that determine this target ratio. In contrast, the pecking order model rejects a target debt ratio, because firms are expected to finance...