Security Design of Callable Convertible Bonds and Issuers' External Financing Costs

Florence Andre-Le Pogamp and Khalid El Badraoui

Brussels Economic Review, 2013, vol. 56, issue 1, 61-81

Abstract: ABSTRACT:Existing research argues that convertible bonds mitigate issuers’ external financing costs offinancial distress, agency conflicts and informational asymmetry. The purpose of this paper is totest whether callable convertible bonds are designed in response to costly debt- and equityrelatedfinancing problems. We identify the design (debt-, mixed- and equity-like) of callableconvertible bonds using a measure of conversion probability which accounts for callability.Indeed, most of the existing empirical financial literature on convertible debt design does notpay much attention to the call feature in spite of its important repercussions on the securitydesign. The empirical study provides evidence from 213 French callable convertible bonds overthe period 1990-2010 that the issuer features, and hence the offering motives vary with thedesign of callable convertible debt.

Keywords: Callable convertible bonds; Call feature; External financing costs; Probability of conversion; Security design (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/1596 ... POGAMPELBADRAOUI.pdf ARTICLELEPOGAMPELBADRAOUI (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bxr:bxrceb:2013/159692

Ordering information: This journal article can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/159692

Access Statistics for this article

More articles in Brussels Economic Review from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().