Abstract

http://ssrn.com/abstract=1477687
 


 



What Motivates Exchangeable Debt Offerings?


Anna N. Danielova


McMaster University - Finance & Business Economics

Scott Smart


Indiana University - Kelley School of Business - Department of Finance

John Boquist


Indiana University - Kelley School of Business - Department of Finance

September, 23 2009

Journal of Corporate Finance, Forthcoming

Abstract:     
Debt that is convertible into shares of a company other than the issuer is called exchangeable debt. Most firms that issue exchangeable debt hold large blocks of shares in several companies, and in this paper we study factors that influence the selection of a particular block to serve as the underlying asset for an exchangeable debt issue. Comparisons between issuers’ holdings in different firms sheds light on issuers’ performance as monitors as well as their ability to engage in market timing. Holdings attached to these issues display superior past operating performance, but after the offer, both operating performance and stock returns decline. In contrast, we do not find similar systematic performance patters for the “other holdings” of exchangeable debt issuers.

Keywords: exchangeable debt, capital structure

JEL Classification: D82, G12, G14, G32

Accepted Paper Series





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Date posted: September 24, 2009  

Suggested Citation

Danielova, Anna N. and Smart, Scott and Boquist, John, What Motivates Exchangeable Debt Offerings? (September, 23 2009). Journal of Corporate Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1477687

Contact Information

Anna N. Danielova
McMaster University - Finance & Business Economics ( email )
School of Business
1280 Main St. W.
Hamilton, ON L8S 4M4
Canada
Scott B. Smart (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Kelley School of Business
Bloomington, IN 47405
United States
812-855-3401 (Phone)
812-855-5875 (Fax)

John Boquist
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-8568 (Phone)
812-855-5875 (Fax)

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