Convertibles and Hedge Funds as Distributors of Equity Exposure

• 成果类型: Article
• 署名作者: Brown, Stephen J.; Grundy, Bruce D.; Lewis, Craig M.; Verwijmeren, Patrick
• 署名单位: Vrije Universiteit Amsterdam; Tinbergen Institute; University of Glasgow; University of Melbourne; New York University; Vanderbilt University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs088
• 发表日期: 2012
• 页码: 3077
• 关键词: UNDERWRITER COMPENSATION; debt; INVESTMENT; bonds; DESIGN; MARKET; RISK

摘要

By buying convertibles and shorting the underlying stock, hedge funds distribute equity exposure to well-diversified shareholders. We find that firms with characteristics that make seasoned equity offerings expensive are more likely to issue convertibles to hedge funds. We conclude that hedge funds provide opportunities for firms to issue convertible securities at a lower cost than seasoned equity by serving as relatively low-cost distributors of equity exposure. A higher fraction of a convertible is privately placed with hedge funds when institutional ownership, stock liquidity, issue size, concurrent stock repurchases, and limitations on callability suggest that shorting costs will be lower.