Do Convertible Bond Issuers Cater to Investor Demand?

51 Pages Posted: 24 Aug 2009

See all articles by Eric Duca

Eric Duca

Colegio Universitario de Estudios Financieros (CUNEF)

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Marie Dutordoir

University of Manchester - Manchester Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2009

Abstract

Investor demand for convertible debt may change over time, due to changes in investor tastes and/or in funds available for convertible investment. We examine whether security-issuing firms cater to temporal fluctuations in investor demand for convertible debt. We find that investor demand proxies are able to explain approximately one-third of the time-series of quarterly U.S. convertible debt volumes over the period 1975 to 2007. Our findings are robust to controlling for intertemporal changes in macroeconomic conditions and convertible debt issuer characteristics. We also document that convertible issuers act opportunistically by pricing their offerings more favorably following increases in investor demand for convertibles.

Keywords: Catering, Convertible Debt, Underpricing

JEL Classification: G32, G39

Suggested Citation

Duca, Eric and de Jong, Abe and Dutordoir, Marie, Do Convertible Bond Issuers Cater to Investor Demand? (August 24, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1460672 or http://dx.doi.org/10.2139/ssrn.1460672

Eric Duca (Contact Author)

Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

Abe De Jong

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-25
Rotterdam, 3000 DR
Netherlands
+31 10 408 1022 (Phone)

HOME PAGE: http://https://www.rsm.nl/people/abe-de-jong/

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Marie Dutordoir

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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