A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: do they differ?

Hui Li; Hong Li; Antonios Siganos

doi:10.1016/j.irfa.2014.06.004

A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: do they differ?

Hui Li, Hong Li, Antonios Siganos

Birmingham Business School

Research output: Contribution to journal › Article › peer-review

7 Citations (Scopus)

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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 language	English
Pages (from-to)	356-366
Journal	International Review of Financial Analysis
Volume	45
Early online date	24 Jun 2014
DOIs	https://doi.org/10.1016/j.irfa.2014.06.004
Publication status	Published - 1 May 2016

Keywords

Convertible bond announcement effect
financials
regulation

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Li_et_al_A_comparison_of_the_stock_market_International_Review_of_Financial_Analysis_2016Accepted author manuscript, 626 KBLicence: Creative Commons: Attribution-NonCommercial-NoDerivs (CC BY-NC-ND)

https://www.sciencedirect.com/science/article/pii/S1057521914000921Licence: None: All rights reserved

Cite this

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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.",

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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.

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A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: do they differ?

Abstract

Keywords

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