The Financing Decisions of Convertible Debt and The Long-Run Performance after Conversion

• Main Authors: Tzu-Yang Chang, 張梓洋
• Other Authors: Jane-Raung Lin
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/07116440230992354463

碩士 === 國立交通大學 === 財務金融研究所 === 96 === In the past, there was lots of literatures treating firms' performance after issuing convertible debt, but few scholars tended to discuss the long run performance after conversion. It is difficult to collect the information about the date when the convertible is converted on. Therefore, in this study, we treat the case where the price exceeds the conversion price as the timing of conversion. Then, we exam the long run performance after conversion. Literatures suggest that convertible debt reduces the debt- and equity-related costs of external finance, so many firms issue convertible debt instead of standard securities such as straight debt (Green, 1984) or common equity (Stein, 1992). This paper also contrasts the long-run abnormal returns after conversion based on two different incentives. Besides, we try to explain the firms’ financing decisions to issue convertible debt by adopting the duration model. The result indicates that firms on average perform poorly in the long time after conversion, particularly for equity-like convertible debt. Moreover, it reveals that the business cycle, firm size, offer size, stock volatility, financial leverage and future investment opportunities have significant influence on the financing decisions of issuing convertible debt.