The curious case of converts

Xiaoyang Li, Shannon Lin and Alan L. Tucker

Global Finance Journal, 2016, vol. 31, issue C, 1-17

Abstract: We document negative abnormal returns and abnormally high short selling in the trading days immediately before the private placements of U.S. convertible bonds. Issues experiencing greater post-placement short selling have more intense pre-placement short selling. In contrast, there are no pre-placement negative abnormal returns and less pre-placement abnormal short selling for issuers who also engage in share repurchases. Pre-placement findings are related to specific terms of the converts and related buybacks. While other potential explanations exist, the overall weight of the evidence suggests that the most plausible explanation is front-running.

Keywords: Convertible bond arbitrage; Hedge funds; Front-running; Short selling; Forensic finance (search for similar items in EconPapers)
JEL-codes: D82 G2 G38 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:31:y:2016:i:c:p:1-17

DOI: 10.1016/j.gfj.2016.11.002

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