Is There a Window of Opportunity for Convertible Debt Issuance? Evidence for Western Europe

45 Pages Posted: 17 Nov 2005

See all articles by Marie Dutordoir

Marie Dutordoir

University of Manchester - Manchester Business School

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics

Date Written: November 2005

Abstract

This paper hypothesizes that hot convertible debt markets represent periods with smaller convertible debt-related financing costs. In line with this assumption, we find that the stock price impact of Western European convertible debt announcements is less negative during hot convertible debt windows. Importantly, this finding holds while controlling for equity and straight debt market conditions and for macroeconomic determinants. In addition, we show that stockholders are less sensitive to issuer- and issue-specific financing costs during hot convertible debt markets. Overall, these results indicate that hot convertible markets represent windows of opportunity for convertible debt issuance. Firms with high financing costs act accordingly by timing their convertible offering during a hot market.

Keywords: Convertible Debt, Hot Markets, Event Study, Western Europe

JEL Classification: G14, G32

Suggested Citation

Dutordoir, Marie and Van De Gucht, Linda M., Is There a Window of Opportunity for Convertible Debt Issuance? Evidence for Western Europe (November 2005). Available at SSRN: https://ssrn.com/abstract=846565 or http://dx.doi.org/10.2139/ssrn.846565

Marie Dutordoir (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics ( email )

Naamsestraat 69
B-3000 Leuven
BELGIUM

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