A Comparison of the Stock Market Reactions of Convertible Bond Offerings between financial and Non-Financial Institutions

Do they differ?

Frank Hong Liu, Hui Li, Antonios Siganos

Research output: Contribution to journalArticle

2 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)356-366
Number of pages11
JournalInternational Review of Financial Analysis
Volume45
Early online date24 Jun 2014
DOIs
Publication statusPublished - May 2016

Fingerprint

Financial institutions
Convertible bonds
Stock market reaction
Stock price reaction
Cumulative abnormal return
Short selling

Keywords

  • convertible bond announcement effect
  • financials
  • regulation

Cite this

@article{11a98f289d364a1f84e8ef3450d27888,
title = "A Comparison of the Stock Market Reactions of Convertible Bond Offerings between financial and Non-Financial Institutions: Do they differ?",
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.",
keywords = "convertible bond announcement effect, financials, regulation",
author = "Liu, {Frank Hong} and Hui Li and Antonios Siganos",
year = "2016",
month = "5",
doi = "10.1016/j.irfa.2014.06.004",
language = "English",
volume = "45",
pages = "356--366",
journal = "International Review of Financial Analysis",
issn = "1057-5219",
publisher = "Elsevier Inc.",

}

TY - JOUR

T1 - A Comparison of the Stock Market Reactions of Convertible Bond Offerings between financial and Non-Financial Institutions

T2 - Do they differ?

AU - Liu, Frank Hong

AU - Li, Hui

AU - Siganos, Antonios

PY - 2016/5

Y1 - 2016/5

N2 - 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.

AB - 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.

KW - convertible bond announcement effect

KW - financials

KW - regulation

U2 - 10.1016/j.irfa.2014.06.004

DO - 10.1016/j.irfa.2014.06.004

M3 - Article

VL - 45

SP - 356

EP - 366

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -