Devising a non-standard convertible zero-coupon bond to enhance corporate governance

Rodolfo Apreda

No 421, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

Abstract: This research paper brings forward a non-standard convertible zero-coupon bond endowed with a set of distinctive features attached to it so as to strengthen the corporate governance of the issuer, namely that conversion actually takes place at maturity date only; that conversion is mandatory; it offers investors a pay-off function tailored to match the conversion; there is no call provision whatsoever; it is suitable for private or public placements; credit-risk rating is of the essence and, lastly, it requires from the company a track record statement on behalf of investors. Although this sort of bond actually provides the company with a powerful financing vehicle, we argue that it could also play a constructive role if it were used in compensation packages for rewarding both senior managers and the Board of Directors.

Keywords: zero-coupon bond; convertible bond; corporate governance; covenants; compensation packages; track record statement (search for similar items in EconPapers)
JEL-codes: G11 G12 G32 G34 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:cem:doctra:421

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