Negative stock price reactions to conversion-forcing calls of convertible bonds and preferred stocks are reexamined 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,...

Firms' announcements to call in-the-money convertible securities for redemption essentially force their conversion into common stock, and such announcements are generally met with significant reductions in the calling firms' equity values. An explanation based on liquidity costs is advanced and...