This paper examines the relationship between convertible debt issue announcements, announcement period share price reactions, and the profitability of the issuing firm's growth opportunities. We find that investor reactions are positively related to the profitability of the issuing firm's...

This paper proposes and implements a security design framework to assess why corporate managers issue convertible debt. We examine three theories that make predictions about the design of convertible debt. Our results suggest that some issuers design convertible debt to mitigate asset...

This paper examines post-issue operating performance, risk characteristics, and analyst forecasts to more fully understand issuer motivations for, and investor reactions to, the issuance of convertible debt. The main finding is that announcements of convertible debt offerings convey information...

This paper examines the ability of the risk-shifting hypothesis and the backdoor-equity hypothesis to explain firms' decisions to issue convertible debt. Using a security choice model that incorporates pre-offer issue, issuer, and macroeconomic information, we document significant variation in...

We study announcements of convertible debt issues by a large sample of 503 NYSE/AMEX and 303 NASDAQ firms. Pre-issue share price performance is abnormally good for both sets of firms. Announcement period returns are significantly negative for both sets of firms, and post-issue performance also...