A Sequential Signalling Model of Convertible Debt Call Policy

@inproceedings{Harris1985ASS,
  title={A Sequential Signalling Model of Convertible Debt Call Policy},
  author={Milton Harris and Arthur Raviv},
  year={1985}
}
In this paper we attempt to resolve two puzzles concerning convertible debt calls. The first is that although it has been shown that conversion of these bonds should optimally be forced as soon as this is feasible, actual calls are significantly delayed relative to this prescription. The second is that common stock returns are significantly negative around the announcement of the call of a convertible debt issue. Our purpose is to simultaneously rationalize managers' observed call decisions and… CONTINUE READING

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