Convertible call policies. An empirical analysis of an information-signaling hypothesis

Aharon R. Ofer; Ashok Natarajan

doi:10.1016/0304-405X(87)90030-4

Convertible call policies. An empirical analysis of an information-signaling hypothesis

Aharon R. Ofer^*, Ashok Natarajan

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

59 Scopus citations

Abstract

This paper tests an information-signaling hypothesis as a potential explanation for corporate convertible bond call policies and for the negative share price reaction to the announcement of the calls. We test this hypothesis by trying to ascertain whether the information signaled is realized. Our results show an unexpected decline in the firm's performance subsequent to the call. We also find significant negative cumulative returns during a sixty-month period following the calls.

Original language	English (US)
Pages (from-to)	91-108
Number of pages	18
Journal	Journal of Financial Economics
Volume	19
Issue number	1
DOIs	https://doi.org/10.1016/0304-405X(87)90030-4
State	Published - Sep 1987

Funding

*We have benefited from the comments and suggestions of Ravi Jagannathan. Robert Korajczyk, David Larcker, Artur Raviv. Daniel Siegel, Eduardo Schwartz (the referee). and Clifford W. Smith (the editor). Research assistance was provided by Stephen V. Thomas. Financial support from the Banking Research Center and the Accounting Research Center at Northwestern University is gratefully acknowledged. The usual disclaimer applies.

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/0304-405X(87)90030-4

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abstract = "This paper tests an information-signaling hypothesis as a potential explanation for corporate convertible bond call policies and for the negative share price reaction to the announcement of the calls. We test this hypothesis by trying to ascertain whether the information signaled is realized. Our results show an unexpected decline in the firm's performance subsequent to the call. We also find significant negative cumulative returns during a sixty-month period following the calls.",

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PY - 1987/9

Y1 - 1987/9

N2 - This paper tests an information-signaling hypothesis as a potential explanation for corporate convertible bond call policies and for the negative share price reaction to the announcement of the calls. We test this hypothesis by trying to ascertain whether the information signaled is realized. Our results show an unexpected decline in the firm's performance subsequent to the call. We also find significant negative cumulative returns during a sixty-month period following the calls.

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Convertible call policies. An empirical analysis of an information-signaling hypothesis

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