Does financial regulation influence convertible bond announcement effects of financial firms?

• Main Authors: Ho, Wan Ting, 何宛庭
• Other Authors: Chan, Konan
• Format: Others
• Language: en_US
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/da4nw7

碩士 === 國立政治大學 === 財務管理研究所 === 106 === Using a sample of US convertible bonds, we confirm that both financial and non-financial firms experience negative announcement returns of convertible bond issuance, and find that financial firms exhibit a 1.41% return higher than non-financial firms. We posit that financial regulations mitigate information asymmetry, thus decreasing the likelihood for financial firms to profit from information asymmetry. Financial firms’ capital structure decisions are constrained by regulations. They are thus not flexible to set the optimal quantity of capital and to time the market. As a result, financial firms tend to have less negative convertible bond announcement returns under strict financial regulations.