Publication Type
Journal Article
Version
acceptedVersion
Publication Date
7-2001
Abstract
The article tests and rejects the hypothesis that managers call in-the-money convertibles when they view a decline in the value of the firm as likely. Inconsistent with this view, it finds that insiders generally buy equity before conversion-forcing calls. Also, analysts tend to raise their earnings forecasts following a call. There is no evidence that earnings analysts interpret a conversion-forcing call as bad news. Indeed there is evidence that, relative to firms in general, analysts are revising their earnings forecasts upward in the months surrounding conversion-forcing calls. The article concludes that an announcement of a conversion-forcing call of a firm's convertible bonds is accompanied by a small decline in the price of the firm's common equity.
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Business
Volume
74
Issue
3
First Page
459
Last Page
476
ISSN
0021-9398
Identifier
10.1086/321934
Publisher
University of Chicago
Citation
EDERINGTON, Louis H. and GOH, Jeremy C..
Is a convertible bond call really bad news?. (2001). Journal of Business. 74, (3), 459-476.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/2203
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://www.jstor.org/stable/10.1086/321934