Short‐Selling Pressure and Last‐Resort Debt Finance: Evidence from 144A High‐Yield Risk‐Adjusted Debt

37 Pages Posted: 5 Dec 2016

See all articles by Kelvin Jui Keng Tan

Kelvin Jui Keng Tan

University of Queensland - Business School; Financial Research Network (FIRN)

Jia Min Lee

University of Queensland - Business School

Robert W. Faff

University of Queensland

Date Written: December 2016

Abstract

This study examines why non‐financial publicly traded firms knowingly issue wealth destroying Rule 144A debt, which is associated with a negative announcement return and a higher yield. We provide a plausible ‘demand‐side’ explanation (i.e. last‐resort debt financing) for the motivation for issuing such debt. We also provide evidence as to what drives this negative reaction. Our findings suggest that the negative market impact is mainly driven by short‐selling pressure from convertible bond arbitrageurs.

Keywords: Convertible bond arbitrage, Last‐resort debt financing, Market reaction, Operational financing needs, Rule 144A debt

Suggested Citation

Tan, Kelvin Jui Keng and Lee, Jia Min and Faff, Robert W., Short‐Selling Pressure and Last‐Resort Debt Finance: Evidence from 144A High‐Yield Risk‐Adjusted Debt (December 2016). Accounting & Finance, Vol. 56, Issue 4, pp. 1149-1185, 2016. Available at SSRN: https://ssrn.com/abstract=2879667 or http://dx.doi.org/10.1111/acfi.12125

Kelvin Jui Keng Tan (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Jia Min Lee

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
112
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information