Do Convertible Bond Issuers Cater to Investor Demand?

48 Pages Posted: 15 Mar 2010 Last revised: 27 Sep 2010

See all articles by Abe de Jong

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Marie Dutordoir

University of Manchester - Manchester Business School

Eric Duca

Colegio Universitario de Estudios Financieros (CUNEF)

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Date Written: February 15, 2010

Abstract

Convertible debt represents an important source of financing for U.S. companies. We examine whether convertible bond issuance activity is influenced by changes in investor demand for convertible debt. We find that investor demand proxies are able to explain approximately one-third of the time-series variation in U.S. convertible debt issuance volumes over the period 1975 to 2007. We also document that convertible issuers act opportunistically by pricing their offerings more favorably following increases in investor preferences for convertibles, and by adjusting the design of their offerings towards changes in investor tastes. Our findings are robust to controlling for macroeconomic conditions and issuer characteristics.

Keywords: Catering, Capital Supply, Convertible Debt, Underpricing

JEL Classification: G32, G39

Suggested Citation

de Jong, Abe and Dutordoir, Marie and Duca, Eric, Do Convertible Bond Issuers Cater to Investor Demand? (February 15, 2010). Available at SSRN: https://ssrn.com/abstract=1570088 or http://dx.doi.org/10.2139/ssrn.1570088

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

Eric Duca (Contact Author)

Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

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