The Fluctuating Maturities of Convertible Bonds

39 Pages Posted: 24 Jun 2020

See all articles by Patrick Verwijmeren

Patrick Verwijmeren

Erasmus University Rotterdam (EUR)

Antti Yang

Erasmus University Rotterdam

Date Written: January 23, 2020

Abstract

The maturities of newly issued convertible bonds vary substantially over time. Firm-specific determinants of maturity from the straight debt literature are relevant for convertible bonds. However, the growth of the convertible arbitrage industry and the role of convertible arbitrage hedge funds have changed the importance of firm characteristics in the convertible bond market. Recently issued convertible bonds come with particularly short maturities that serve as substitutes for call provisions. This substitution implies that backdoor-equity and sequential-financing rationales for issuing callable convertible bonds are also applicable for non-callable convertibles with shorter maturities.

Keywords: convertible bonds, maturity choice, security design, convertible arbitrage

Suggested Citation

Verwijmeren, Patrick and Yang, Antti, The Fluctuating Maturities of Convertible Bonds (January 23, 2020). Journal of Corporate Finance, Vol. 62, 2020, Available at SSRN: https://ssrn.com/abstract=3616904

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Antti Yang (Contact Author)

Erasmus University Rotterdam ( email )

Netherlands

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