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On the Information Content of Calls of Convertible Securities

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  • Byrd, Anthony K
  • Moore, William T

Abstract

Negative stock price reactions to conversion-forcing calls of convertible bonds and preferred stocks are reexamined and most of the sample firms are shown to exhibit full price recovery by the end of the conversion period. In addition, analysts' earnings forecasts, both short-term and long-term, are found to be revised upward following call announcements for convertible bonds and preferred stocks. The combined findings cast doubt on the established belief that such capital structure decisions signal negative information about firm value. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Byrd, Anthony K & Moore, William T, 1996. "On the Information Content of Calls of Convertible Securities," The Journal of Business, University of Chicago Press, vol. 69(1), pages 89-101, January.
    • Handle: RePEc:ucp:jnlbus:v:69:y:1996:i:1:p:89-101
    DOI: 10.1086/209681
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    Citations

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    Cited by:

    1. Bechmann, Ken L., 2004. "Short sales, price pressure, and the stock price response to convertible bond calls," Journal of Financial Markets, Elsevier, vol. 7(4), pages 427-451, October.
    2. Omar, Ayishat & Tang, Alex P., 2019. "Earnings management and convertible preferred stock calls," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 423-433.
    3. Tobias Nigbur, 2015. "Calls of convertible debt securities: no bad news at all," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(1), pages 61-79, February.
    4. repec:bla:finmgt:v:36:y:2007:i:2:p:1-21:1 is not listed on IDEAS
    5. Fernando Díaz & Rodolfo Martell & Gabriel Ramírez, 2011. "Agency Effects in the Convertible Debt Puzzle: An Empirical Investigation," Working Papers 26, Facultad de Economía y Empresa, Universidad Diego Portales.
    6. Grundy, Bruce D. & Veld, Chris & Verwijmeren, Patrick & Zabolotnyuk, Yuriy, 2014. "Why are conversion-forcing call announcements associated with negative wealth effects?," Journal of Corporate Finance, Elsevier, vol. 24(C), pages 149-157.
    7. Kim, Yong O. & Kallberg, Jarl, 1998. "Convertible calls and corporate taxes under asymmetric information," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 19-40, January.

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