IDEAS home Printed from https://ideas.repec.org/p/cdl/anderf/qt53r645wn.html
   My bibliography  Save this paper

Convertible Bonds: Test of a Financial Signalling Model

Author

Listed:
  • Brennan, Michael J.
  • Her, Constance

Abstract

This paper presents an empirical test of the Brennan Kraus (1987) hypothesis of convertible bond financing, according to which firms signal their volatility by their choice of terms of the convertible issue. With additional assumptions about the nature of investors’ prior beliefs about firm types the model predicts that the announcement period return will be positive related to the face value of the convertible, and negatively related to the fraction of the firm accruing to the convertible holders on conversion. The empirical evidence for a sample of public issues strongly supports these predictions, while that for a sample of private placements does not, which is consistent with problems of information asymmetry being important for the former but not for the latter.

Suggested Citation

  • Brennan, Michael J. & Her, Constance, 1995. "Convertible Bonds: Test of a Financial Signalling Model," University of California at Los Angeles, Anderson Graduate School of Management qt53r645wn, Anderson Graduate School of Management, UCLA.
    • Handle: RePEc:cdl:anderf:qt53r645wn
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/53r645wn.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yongsik Kim, 2020. "Announcement Effects of Convertible and Warrant Bond Issues with Embedded Refixing Option: Evidence from Korea," Sustainability, MDPI, vol. 12(21), pages 1-21, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:anderf:qt53r645wn. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/aguclus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.