Does Corporate Governance Influence Convertible Bond Issuance?

49 Pages Posted: 21 May 2012

See all articles by Marie Dutordoir

Marie Dutordoir

University of Manchester - Manchester Business School

Norman C. Strong

University of Manchester - Alliance Manchester Business School

Marius Ziegan

University of Manchester - Manchester Business School

Date Written: April 1, 2012

Abstract

We examine the influence of corporate governance quality on firms’ choice between convertible debt, straight debt, and equity. Using a Western European sample of security offerings made between 2000 and 2010, we find that weaker firm-specific and country-specific corporate governance quality increases firms’ likelihood of issuing convertible debt instead of straight debt and common equity. We also find that stockholder reactions to convertible debt announcements are more favorable for firms with weaker corporate governance. Overall, our results suggest that firms with poor corporate governance quality use convertible debt to achieve lower external financing costs.

Keywords: security choice, convertible debt, corporate governance

JEL Classification: G32, G34

Suggested Citation

Dutordoir, Marie and Strong, Norman Charles and Ziegan, Marius, Does Corporate Governance Influence Convertible Bond Issuance? (April 1, 2012). Available at SSRN: https://ssrn.com/abstract=2063557 or http://dx.doi.org/10.2139/ssrn.2063557

Marie Dutordoir

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Norman Charles Strong

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Marius Ziegan (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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