Why Do Western European Firms Issue Convertibles Instead of Straight Debt or Equity?

21 Pages Posted: 27 May 2009

See all articles by Marie Dutordoir

Marie Dutordoir

University of Manchester - Manchester Business School

Linda Van de Gucht

affiliation not provided to SSRN

Abstract

Unlike their US counterparts, European convertible debt issuers tend to be large companies with small debt- and equity-related financing costs. Therefore, it is puzzling why these firms issue convertibles instead of standard financing instruments. This paper examines European convertible debt issuer motivations by estimating a security choice model that incorporates convertibles, straight debt, and equity. We find that European convertibles are used as sweetened debt, not as delayed equity. This motivation is reflected in the debt-like design of most European convertible issues.

Suggested Citation

Dutordoir, Marie and Van de Gucht, Linda, Why Do Western European Firms Issue Convertibles Instead of Straight Debt or Equity?. European Financial Management, Vol. 15, Issue 3, pp. 563-583, June 2009. Available at SSRN: https://ssrn.com/abstract=1410319 or http://dx.doi.org/10.1111/j.1468-036X.2007.00433.x

Marie Dutordoir (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Linda Van de Gucht

affiliation not provided to SSRN

No Address Available

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