Affordable Access

Publisher Website

Convertible bonds as backdoor equity financing

Authors
Journal
Journal of Financial Economics
0304-405X
Publisher
Elsevier
Publication Date
Volume
32
Issue
1
Identifiers
DOI: 10.1016/0304-405x(92)90022-p

Abstract

Abstract This paper argues that corporations may use convertible bonds as an indirect way to get equity into their capital structures when adverse-selection problems make a conventional stock issue unattractive. Unlike other theories of convertible bond issuance, the model here highlights: 1) the importance of call provisions on convertibles and 2) the significance of costs of financial distress to the information content of a convertible issue.

There are no comments yet on this publication. Be the first to share your thoughts.