Economics, Econometrics and Finance
8 years ago

Convertible debt issuance linked to poor firm performance, study finds.

Journal of Corporate Finance
The long-run performance of firms that issue convertible debt: an empirical analysis of operating characteristics and analyst forecasts
Craig M. Lewis, Richard J. Rogalski, James K. Seward

Paper Summary

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Firms that issue convertible debt often perform poorly afterwards, despite theories suggesting it should benefit them. The design and issuance of convertible debt securities do not lead to efficient investment decisions as predicted. Investors may limit some firms' access to the stock market after offering convertible debt.