A re-examination of shareholder wealth effects of calls of convertible preferred stock

Article Abstract:

Common stock price reactions to announcements of 67 calls of in-the-money convertible preferred stocks are examined, and a significant average abnormal return of -1.6 percent is documented. The finding is robust to the choice of estimation period and the assumed return-generating process. Annual dividend obligations for the called preferred issues in the sample typically are greater than the dividends for the common shares into which they are converted, and announcement-period abnormal returns are negatively correlated with changes in dividends. Moreover, calls that result in dilution of voting rights appear to have greater adverse valuation effects than calls that do not alter voting rights concentration. (Reprinted by permission of the publisher.)

Analysis, Evaluation, Stocks, Voting rights (Stockholders), Preferred stocks, Financial research, Convertible preferred stocks

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The valuation effects of private placements of convertible debt

Article Abstract:

Share price reactions to announcements of 61 private placements of convertible debt securities are investigated and a significant average abnormal return of 1.80% is documented. This unique result contrasts with the negative average abnormal return associated with public sales of convertible debt securities. The positive effect on shareholders' wealth appears to be related to the relative size of the private issue and unrelated to the the degree to which the convertible bond is 'out-of-the-money' at issuance. (Reprinted by permission of the publisher.)

Research, Convertible bonds, Private placements (Securities)

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Convertible Bond Design and Capital Investment: The Role of Call Provisions

Article Abstract:

It is posited that call protection is correlated with expiration expectations regarding a firm's investment options. Stronger call protection is offered for options expected to expire later; weaker protection is offered for those expected to expire sooner. Capital expenditure levels are found to be inversely related to protection period length.

Comparative analysis, Capital expenditures, Call options

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