Business, Management and Accounting
4 years ago

Convertible debt design boosts firm value and market reactions, study finds.

Journal of Banking & Finance
Industry conditions, growth opportunities and market reactions to convertible debt financing decisions
Craig M. Lewis, Richard J. Rogalski, James K. Seward

Paper Summary

Firms issuing convertible debt can design it to reduce costs and affect share prices. A study of 588 security offers shows that convertible debt can help manage different financial costs and reactions depend on how it's structured. Convertible debt issuers have complex relationships between firm value, debt levels, growth opportunities, and future growth rates.

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