WEALTH EFFECTS OF CONVERTIBLE BOND ISSUES – FURTHER EVIDENCE OF AGENCY COSTS AND MANAGERIAL ENTRENCHMENT

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Christopher Fink, Dirk Schiereck, Joachim Vogt

DOI:10.22495/cocv7i4p3

Abstract

There is still some ambiguity about the company’s motivation for using the hybrid finance instrument of convertible bonds. Although manifold theoretical approaches provide varying assumptions about the rationale behind the issuance of convertible bonds, the empirical evidence about the major issuance reasons and the subsequent wealth impacts for the issuer remains mixed. The purpose of our study is to evaluate the relevance of these various theoretical approaches to explain empirically the motivation and characteristics of a company when issuing convertible debt and the resulting wealth effects for the company’s shareholders.

Keywords: Convertible Bonds, Short-Term and Long-Term Wealth Effects, Wealth Impacts

How to cite this paper: Fink, C., Schiereck, D., Vogt, J. (2010). Wealth effects of convertible bond issues – further evidence of agency costs and managerial entrenchment. Corporate Ownership & Control, 7(4), 34-49. http://doi.org/10.22495/cocv7i4p3