Risk dynamics surrounding the issuance of convertible bonds |
| |
| Authors: | Felix Zeidler Mark Mietzner Dirk Schiereck |
| |
| Institution: | 1. School of Management, Boston University, and IDC, 595 Commonwealth, Boston, MA 02215, USA;2. University of Lausanne and Swiss Finance Institute, Extranef, CH-1015 Lausanne, Switzerland;1. U.S. Securities and Exchange Commission, Division of Risk, Strategy and Financial Innovation, 100 F Street N.E., Washington, DC 20549, United States;2. Owen Graduate School of Management, Vanderbilt University, 401 21st Avenue South, Nashville, TN 37203, United States;3. Erasmus University Rotterdam, Erasmus School of Economics, Burg. Oudlaan 50, 3000 DR Rotterdam, The Netherlands;4. University of Melbourne, Parkville, Victoria 3010, Australia;5. Adam Smith Business School, University of Glasgow, Glasgow, Scotland G12 8QQ, United Kingdom;1. Faculty of Business and Economics, University of Melbourne, VIC 3010, Australia;2. Adam Smith Business School, University of Glasgow, Glasgow, Scotland G12 8QQ, UK;3. Erasmus University Rotterdam, Burgemeester Oudlaan 50, 3000 DR Rotterdam, the Netherlands;4. Sprott School of Business, Carleton University, Ottawa, Ontario K1S 5B6, Canada;1. Antai College of Economics & Management, Shanghai Jiao Tong University, 535 Fa Hua Zhen Road, Shanghai 200052, China;2. Massey University, New Zealand;3. Zhonghai Fund Management Co., Ltd., China |
| |
| Abstract: | This paper analyzes the risk dynamics surrounding convertible bond offerings (CBOs) and Seasoned Equity Offerings (SEOs). As convertible bonds are commonly believed to be very effective at mitigating adverse selection or overinvestment problems we would expect differing risk and return patterns for convertible bond and seasoned equity issuers. By analyzing 1148 convertible bond offerings and comparing them to 2905 seasoned equity offerings, we show however that for both issuer types the systematic risk increases prior to issuance and drops sharply thereafter. This result is consistent with the notion of exercising real options, as growth options are always riskier than the underlying assets and exercising them at issuance causes an immediate drop in risk. The real option framework and the proposed dynamics of systematic risk also provide a rational explanation for the negative announcement effect, as well as any long-term underperformance subsequent to the CBO and the SEOs. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
