Partially Anticipated Convertible Calls |
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| Authors: | Ji-Chai Lin K C Chen |
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| Institution: | Louisiana State University, Baton Rouge, LA 70803.;California State University, Fresno, CA 93740. The authors thank Louis Ederington, John Howe, Mike Rozeff, Tony Safranski, and two anonymous reviewers for their helpful comments. An earlier version of this paper was presented at the 1989 Western Finance Association Annual Meetings and the 1989 Financial Management Association Annual Meetings. |
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| Abstract: | This paper derives estimators that measure the impact of foregoing an opportunity to call convertible debt and the call announcement effect on the value of the firm. The results indicate that positive abnormal returns are associated with foregoing a call, and returns are negative upon the announcement of the call. These results are consistent with Harris and Raviv's hypothesis that managers with favorable information delay their calls and will call the debt if and only if their information is unfavorable. |
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