Call Me Maybe? Bondholder Relationships and Corporate Call Policy

48 Pages Posted: 1 Sep 2023 Last revised: 27 Nov 2023

See all articles by Paul Beaumont

Paul Beaumont

McGill University - Desautels Faculty of Management

David Schumacher

McGill University

Gregory Weitzner

McGill University

Date Written: November 20, 2023

Abstract

When a firm refinances a bond by calling it, existing bondholders are forced to sell their bonds back to the firm at a below-market price. This paper shows that calls impact firms' bondholder relationships. After a call, existing bondholders are far less likely to participate in the firm’s subsequent bond issuances. Funds from the largest families are far more likely to exit, consistent with them exerting market power. In turn, firms delay calling their bonds when they have more funds from large families in their bondholder base. Finally, we show that firms' borrowing costs are affected by their reputation for call delays. Our results show how firms' financial policies affect bondholder relationships and highlight the role of both firm and investor reputation in financial markets.

Suggested Citation

Beaumont, Paul and Schumacher, David and Weitzner, Gregory, Call Me Maybe? Bondholder Relationships and Corporate Call Policy (November 20, 2023). Available at SSRN: https://ssrn.com/abstract=4558328 or http://dx.doi.org/10.2139/ssrn.4558328

Paul Beaumont

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

HOME PAGE: http://https://paulhbeaumont.github.io/

David Schumacher (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
5143984778 (Phone)

HOME PAGE: http://www.davidschumacher.info

Gregory Weitzner

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

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