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A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?

Hui Li, Hong Liu and Antonios Siganos

International Review of Financial Analysis, 2016, vol. 45, issue C, 356-366

Abstract: We focus on the stock price reaction to convertible bond offering made by financial institutions and find that the cumulative abnormal return over the three day interval around convertible bond issuance is 1.41 percentage higher than that for non-financial institutions. This result supports our hypothesis that since financials are heavily regulated, the market is less likely to assume that the issuance of convertible bond by financials signals information that are overvalued. Our results remain robust after controlling for a number of firm-, issue-, and market-specific characteristics as well as the level of short selling pressure induced by convertible bond arbitrageurs.

Keywords: Convertible bond announcement effect; Financials; Regulation (search for similar items in EconPapers)
JEL-codes: G21 G14 G18 (search for similar items in EconPapers)
Date: 2016
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