Convertible Bonds are Not Called Late

J. OF FINANCE, Vol. 50 No. 4, September 1995

Posted: 5 Jul 1998

See all articles by Paul Asquith

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Abstract

Starting with Ingersoll (1977b), the academic literature has repeatedly sought to explain why convertible bonds are called late. The findings here demonstrate there is no call delay to explain. This paper finds that most convertible bonds, given their call protection, are called as soon as possible. For those that are not, there are significant cash flow advantages to delaying. The median call delay for all convertible bonds is less than four months. If a safety premium is desired to assure the conversion value will exceed the call price at the end of call notice period, the median call period is less than a month.

JEL Classification: G14

Suggested Citation

Asquith, Paul, Convertible Bonds are Not Called Late. J. OF FINANCE, Vol. 50 No. 4, September 1995. Available at SSRN: https://ssrn.com/abstract=7119

Paul Asquith (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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