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 journalArticlepeer-review

12 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

Keywords

  • convertible bond announcement effect
  • financials
  • regulation

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