The determinants of the convertible bonds call policy of Western European companies

O. Adoukonou (), Florence André-Le Pogamp () and Jean-Laurent Viviani ()
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O. Adoukonou: CEREGE [Poitiers, La Rochelle] - Centre de recherche en gestion [EA 1722] - UP - Université de Poitiers = University of Poitiers - ULR - La Rochelle Université
Florence André-Le Pogamp: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Jean-Laurent Viviani: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyzes the determinants of the convertible bonds call delay of the Western European firms. This delay is analyzed comparatively to the optimal call policy suggested by Ingersoll (1977a) who argues that in a perfect market, managers should call the convertible bonds immediately when the conversion value reaches the call price. Like the previous studies in the US market, we find that the Western European companies delay the call of their convertible bonds for several weeks. This delay is explained by considering the main theoretical rationales for the convertible bonds call delays (the notice period, the call protection provisions, the cash flow advantage hypothesis, the financial distress and the signaling theory). The results are consistent with the cash flow advantage rationale but less evidence is found for the other theories.

Keywords: Hard call; Soft call; Call delay; Callable convertible bonds (search for similar items in EconPapers)
Date: 2021
Note: View the original document on HAL open archive server: https://hal.science/hal-03040739v1
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Published in International Review of Financial Analysis, 2021, 73, pp.101582. ⟨10.1016/j.irfa.2020.101582⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03040739

DOI: 10.1016/j.irfa.2020.101582

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