A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?

Li, Hui; Liu, Hong; Siganos, Antonios

Abstract

We focus on the stock price reaction to convertible bond offering made by financial institutions and find that the cumulative abnormal return over the three day interval around convertible bond issuance is 1.41 percentage higher than that for non-financial institutions. This result supports our hypothesis that since financials are heavily regulated, the market is less likely to assume that the issuance of convertible bond by financials signals information that are overvalued. Our results remain robust after controlling for a number of firm-, issue-, and market-specific characteristics as well as the level of short selling pressure induced by convertible bond arbitrageurs.

Citation

Li, H., Liu, H., & Siganos, A. (2016). A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?. International Review of Financial Analysis, 45, 356-366. https://doi.org/10.1016/j.irfa.2014.06.004

• Journal Article Type: Article
• Acceptance Date: Jun 24, 2014
• Online Publication Date: Jun 24, 2014
• Publication Date: 2016-05
• Deposit Date: Jul 6, 2021
• Journal: International Review of Financial Analysis
• Print ISSN: 1057-5219
• Electronic ISSN: 1873-8079
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 45
• Pages: 356-366
• DOI: https://doi.org/10.1016/j.irfa.2014.06.004
• Keywords: Convertible bond announcement effect, Financials, Regulation
• Public URL: http://researchrepository.napier.ac.uk/Output/2785053