Are There Windows of Opportunity for Convertible Debt Issuance? Evidence for Western Europe

31 Pages Posted: 23 Dec 2006

See all articles by Linda M. Van De Gucht

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics

Marie Dutordoir

University of Manchester - Manchester Business School

Date Written: October 30, 2006

Abstract

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

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

Suggested Citation

Van De Gucht, Linda M. and Dutordoir, Marie, Are There Windows of Opportunity for Convertible Debt Issuance? Evidence for Western Europe (October 30, 2006). ERIM Report Series Reference No. ERS-2006-055-F&A. Available at SSRN: https://ssrn.com/abstract=942150

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics ( email )

Naamsestraat 69
B-3000 Leuven
BELGIUM

Marie Dutordoir (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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