Does corporate governance influence convertible bond issuance?

Marie Dutordoir, Norman Strong and Marius C. Ziegan

Journal of Corporate Finance, 2014, vol. 24, issue C, 80-100

Abstract: We examine the influence of corporate governance quality on firms' choice between convertible debt, straight debt, and equity using a Western European sample of security offerings made between 2000 and 2010. We find that weaker firm-specific and country-specific corporate governance quality increases firms' likelihood of issuing convertible debt instead of straight debt and common equity. We also find that stockholder reactions to convertible debt announcements are more favorable for firms with weaker corporate governance. Our results suggest that corporate governance quality is a significant security choice determinant, with firms using convertible debt as a substitute for high quality governance mechanisms.

Keywords: Security choice; Convertible debt; Corporate governance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:24:y:2014:i:c:p:80-100

DOI: 10.1016/j.jcorpfin.2013.06.005

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