Characteristics of firms that issue convertible debt versus convertible preferred stock |
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| Institution: | 1. Department of Accounting and Finance, School of Management, The University of Michigan - Dearborn, 4901 Evergreen Road, Dearborn, MI 48128-1491, USA;1. Genetics Division, Department of Pediatrics, King Saud bin Abdulaziz University for Health Science, King Abdullah International Medical Research Centre, King Abdulaziz Medical City, Riyadh, Saudi Arabia;2. Neurology Division, Department of Pediatrics, King Saud bin Abdulaziz University for Health Science, King Abdullah International Medical Research Centre, King Abdulaziz Medical City, Riyadh, Saudi Arabia;3. Medical Imaging Department, King Abdullah Specialized Children Hospital, King Saud bin Abdulaziz University for Health Sciences, King Abdulaziz Medical City, Ministry of National Guard-Health Affairs (NGHA), Riyadh, Saudi Arabia;4. Department of Medical Genetics, King Faisal Specialist Hospital and Research Center, Alfaisal University, Riyadh, Saudi Arabia;5. Division of Child Neurology, University Children''s Hospital, Zurich, Switzerland;6. Department of Genetics, King Faisal Specialist Hospital and Research Center, Riyadh, Saudi Arabia;7. Wellcome Centre for Mitochondrial Research, Institute of Neuroscience, The Medical School, Newcastle University, Newcastle Upon Tyne, NE2 4HH, UK;1. Associate Professor, Oral Pathology, State University of Rio de Janeiro, Rio de Janeiro, RJ, Brazil;2. Undergraduate Student, School of Dentistry, State University of Rio de Janeiro, Rio de Janeiro, RJ, Brazil;3. Director, Stomatology Department, AC Camargo Cancer Center, São Paulo, SP, Brazil;4. Pathology Department, AC Camargo Cancer Center, São Paulo, SP, Brazil;5. Graduate Student, Oral Pathology, Piracicaba Dental School, State University of Campinas, Piracicaba, SP, Brazil;6. Professor, Stomatology, Estácio de Sá University, Rio de Janeiro, RJ, Brazil;7. Titular Professor and Head, Oral Pathology, Piracicaba Dental School, State University of Campinas, Piracicaba, SP, Brazil;1. School of Materials Science and Engineering, South China University of Technology, Guangzhou 510640, China;2. School of Civil Engineering and Transportation, South China University of Technology, Guangzhou 510640, China;3. Earthquake Engineering Research & Test Center, Guangzhou University, Guangzhou, China;1. Center for Atomic and Molecular Technologies, Graduate School of Engineering, Osaka University, Suita, Osaka 565-0871, Japan;2. Department of Chemistry, Nara Women’s University, Kitauoyanishi-machi, Nara, Nara 630-8506, Japan;3. National Institute of Advanced Industrial Science and Technology (AIST), Ikeda, Osaka 563-8577, Japan;1. Department of Spinal Surgery, Jining No. 1 People''s Hospital, Jining, Shandong, 272011, PR China;2. Department of Urology Surgery, Jining No. 1 People''s Hospital, Jining, Shandong, 272011, PR China |
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| Abstract: | This study examines the characteristics of firms that issue convertible debt versus firms that issue convertible preferred stock. The findings are consistent with the agency, information asymmetry, optimal capital structure, financial distress, and tax benefits hypotheses. The findings also indicate that these two types of convertible securities are used to raise external capital by distinctively different groups of firms. First, convertible preferred stock issuing firms have larger nondebt tax shields and higher levels of financial, operating, and bankruptcy risks than convertible debt issuing firms. Second, firms that issue convertible debt have greater free cash flow (financial slack) and growth potential than firms that issue convertible preferred stock. |
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