The Valuation Effects of Private Placements of Convertible Debt

L Paige Fields and Eric L Mais

Journal of Finance, 1991, vol. 46, issue 5, 1925-32

Abstract: Share price reactions to announcements of sixty-one private placements of convertible debt securities are investigated and a significant positive average abnormal return of 1.80 percent is documented. This unique result contrasts with the negative average abnormal return associated with public sales of convertible debt securities. The positive effect on common shareholders' wealth appears to be related to the relative size of the private issue and unrelated to the degree to which the convertible bond is "out-of-the-money" at issuance. Copyright 1991 by American Finance Association.

Date: 1991
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