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The Association between Issuance of Mezzanine and Firm Value

Author

Listed:
  • Seul Gi Oh

    (School of Business, Yonsei Unviversity, Seoul, South Korea)

  • Ho-Young Lee

    (School of Business, Yonsei Unviversity, Seoul, South Korea)

Abstract

Some firms issue mezzanine for future growth, while some others abuse it. Using Korean firms during 2015-2018, we examine the association between convertible bonds (CB) bonds with warrants (BW) issuance and firm value. We find that issuing CB (BW) is positively associated with firm value, and for firms growing fast, the positive association is strengthened, consistent with investment expansion theory. For firms with greater ownership by the largest shareholder and affiliated parties, the positive association is attenuated, consistent with the wealth transfer hypothesis. Moreover, when outside directors attend a board meeting to issue CB, it has a positive association with firm value.

Suggested Citation

  • Seul Gi Oh & Ho-Young Lee, 2024. "The Association between Issuance of Mezzanine and Firm Value," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 27(02), pages 1-31, June.
    • Handle: RePEc:wsi:rpbfmp:v:27:y:2024:i:02:n:s0219091524500127
    DOI: 10.1142/S0219091524500127
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    More about this item

    Keywords

    Convertible bond; bond with warrant; largest shareholders; affiliated parties; outside directors;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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