Investment Restrictions and the Pricing of Korean Convertible Eurobonds

Posted: 20 Dec 1998

See all articles by Warren Bailey

Warren Bailey

Cornell University; Fudan University - Fanhai International School of Finance and China Institute of Economics and Finance

Y. Peter Chung

University of California at Riverside

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Date Written: May 1994

Abstract

Corporations in developing countries with foreign investment restrictions have begun to issue convertible bonds overseas. Given low covariance of emerging market equity returns with global economic risks, foreign investors should place a relatively high value on these bonds. We use price data for convertible Eurobonds of four Korean corporations to measure the implicit premium foreigners offer for Korean equities relative to prices in the domestic Korean stock market. We find large, volatile premiums which vary widely across firms and differ from the premium on the closed-end Korea Fund listed on the New York Stock Exchange, particularly after foreign access to the Korean stock market was liberalized. Our results have several implications for the pricing of emerging market securities.

JEL Classification: G13, G15, G28

Suggested Citation

Bailey, Warren B. and Chung, Y. Peter and Kang, Jun-Koo, Investment Restrictions and the Pricing of Korean Convertible Eurobonds (May 1994 ). Available at SSRN: https://ssrn.com/abstract=5563

Warren B. Bailey (Contact Author)

Cornell University ( email )

S. C. Johnson Graduate School of Management
387 Sage Hall
Ithaca, NY 14853-6201
United States
607-255-4627 (Phone)
607-254-4590 (Fax)

HOME PAGE: http://courses.cit.cornell.edu/wbb1/

Fudan University - Fanhai International School of Finance and China Institute of Economics and Finance ( email )

China

Y. Peter Chung

University of California at Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States
909-787-3906 (Phone)
909-787-2933 (Fax)

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

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