Disappearing Call Delay and Dividend-Protected Convertible Bonds

• 成果类型: Article
• 署名作者: Grundy, Bruce D.; Verwijmeren, Patrick
• 署名单位: University of Melbourne; Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12363
• 发表日期: 2016
• 页码: 195-224
• 关键词: STOCK-PRICE BEHAVIOR; voluntary conversion; SIGNALING HYPOTHESIS; POLICY; securities; MODEL; debt; REPURCHASES; valuation

摘要

Firms do not historically call their convertible bonds as soon as conversion can be forced. A number of explanations for the delay rely on the size of the dividends that bondholders forgo so long as they do not convert. We investigate an important change in convertible security design, namely, dividend protection of convertible bond issues. Dividend protection means that the conversion value of the convertible bond is unaffected by dividend payments and thus dividend-related rationales for call delay become moot. We document that call delay is near zero for dividend-protected convertible bonds.