Why do convertible issuers simultaneously repurchase stock? An arbitrage-based explanation

• 成果类型: Article
• 署名作者: de Jong, Abe; Dutordoir, Marie; Verwijmeren, Patrick
• 署名单位: Erasmus University Rotterdam; Erasmus University Rotterdam - Excl Erasmus MC; University of Groningen; University of Manchester; University of Melbourne
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.10.016
• 发表日期: 2011
• 页码: 113-129
• 关键词: Convertible debt; Convertible arbitrage; Short selling; Stock repurchase

摘要

Over recent years, a substantial fraction of US 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 repurchase their stock to facilitate arbitrage-related short selling. In line with this prediction, we show that convertibles combined with a stock repurchase are associated with lower offering discounts, lower stock price pressure, higher expected hedging demand, and lower issue-date short selling than uncombined issues. We also find that convertible arbitrage strategies explain both the size and the speed of execution of the stock repurchases. (C) 2010 Elsevier B.V. All rights reserved.