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Convertible Bond Issue Announcement Effect

Convertible Bond Issue Announcement Effect
Author: Hyeong Joon Kim
Publisher:
Total Pages: 46
Release: 2017
Genre:
ISBN:
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This study examines the announcement effect of convertible bond issue in Korea where the issuance of convertible bonds is increasing rapidly. We find that abnormal stock returns are positive for the firms with unusual high trading volume using a sample of listed firms in Korea Stock Exchange during 2000-2015. Moreover, we show that unusual high volume around convertibles issue announcement has positive correlation with capital expenditure when firm has valuable investment opportunities. Therefore, more favorable announcement returns are driven by capital expenditure decisions and the quality of investment opportunities. In the same sense, the impact of cash flow also depends on the issuer's quality of investment opportunities. Additionally, we confirm that issuing convertibles has negative signaling effect that stock of issuer is overvalued, and the issuer's volatility has negative impact around announcement date.

New Evidence on the Announcement Effect of Convertible and Exchangeable Bonds

New Evidence on the Announcement Effect of Convertible and Exchangeable Bonds
Author: Manuel Ammann
Publisher:
Total Pages: 30
Release: 2016
Genre:
ISBN:
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This study investigates the announcement and issuance effects of offering convertible bonds and exchangeable bonds using data for the Swiss and German market during January 1996 and May 2003. The analysis shows that announcement effects of convertible bonds and exchangeable bonds are associated with significantly negative abnormal returns. Unlike previous studies, it also investigates the effect of the market return of the announcement effect and finds that the negative abnormal returns are significantly more pronounced when previous market returns have been negative. Furthermore, we analyze the relation between the announcement effects and equity components by controlling for the equity signal sent to the market. We find the size of the equity component of an issue to have a strong influence on the announcement effect for convertible but not for exchangeable securities and offer an explanation for this difference.

The Convertible Bond Announcement Effect in Japan

The Convertible Bond Announcement Effect in Japan
Author: Michael Mollemans
Publisher:
Total Pages: 61
Release: 2003
Genre:
ISBN:
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In this paper, we analyse the announcement effect of 367 Japanese convertible bond issues from 1992 to 2002. This study is the first that provides CB announcement effect results from Japanese issuers that are consistent with the results from US issuers. In previous studies, CB announcements in Japan have been met with positive or neutral share price performance whereas negative share price returns resulted in the US. Secondly, we provide a new multivariate regression model that quantifies the impact that key variables have on the strength of the CB announcement effect in Japan. Finally, we review and critique a variety of explanatory variables that have been discussed in the financial literature.

The Announcement Effects and the Long-Run Performances of Convertible Bond Issuances

The Announcement Effects and the Long-Run Performances of Convertible Bond Issuances
Author:
Publisher:
Total Pages:
Release: 2001
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ISBN:
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We discuss several measurements of equity components in CBs and then examine the short-run announcement effects and the long-run performances surrounding CB issuances by dividing the whole sample of CBs into a debt-like portfolio, a mixed portfolio and an equity-like portfolio. At the time of the CB issuance announcements, the market reactions to different portfolios strictly follow a hierarchy predicted by the pecking order hypothesis. In the long-run subsequent to the CB issuances, the buy and hold stock returns of the equity-like portfolio significantly underperform the industry and market benchmarks and the debt-like portfolio; the operating performances of the issuers that issuance equity-like CBs significantly deteriorated from the pre issuance period, inducing them to underperform both the issuers that issuance debt-like CBs and their non-issuing counterparts; and also, the equity-like portfolio went through the most significant increase in the idiosyncratic risk and the total equity risk, which however still do not differ significantly from their industry levels. Furthermore, we notice that the CB issuers' post issuance long-run performances are to a large extent consistent with the short-run market reactions they received. By controlling the equity risks, we contend that the market is able to form an unbiased foresight of the future operating performances of the CB issuers at the time of the CB issuances, and the short-run announcement effects are mostly determined by this market perception.

Industry Effects and Convertible Bond Sequence

Industry Effects and Convertible Bond Sequence
Author: Devrim Yaman
Publisher:
Total Pages: 12
Release: 2017
Genre:
ISBN:
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In this paper, we study how the announcement returns of convertible bonds change for different issues in a sequence for firms in various sectors of the economy. We show that industrial firms obtain significantly lower returns in later issues of convertible bonds compared to former issues. In fact, the announcement returns for the first issue of these firms in our sample period is insignificant while the returns for later issues are significantly negative. We obtain the same result for industrial firms even after we control for other variables that affect announcement returns of convertible bonds. Our results show that the announcement returns for financial firms and utilities do not present this pattern. The returns for these firms are similar for different convertible bond issues in a sequence.

Hedge Funds

Hedge Funds
Author: François-Serge Lhabitant
Publisher: Wiley
Total Pages: 0
Release: 2002-05-22
Genre: Business & Economics
ISBN: 9780470844779
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Full coverage of how hedge funds work, from risks to rewards L'Habitant discusses--from an investor's perspective--the potential uses, risks, and returns in hedge funds, while offering both the qualitative and quantitative tools investors need to access these types of funds. Topics not normally covered in discussions of hedge funds are included, such as how to include hedge funds in traditional portfolios, database differences, and non-transparency. A practical guide to a growing, yet little understood, segment of the financial industry. Francois-Serge L'Habitant, PhD (Geneva, Switzerland), is Head of Quantitative Risk Management at Union Bancaire Privee in Geneva, Switzerland. A former computer engineer, he previously served as Director of UBS Private Banking Division. Over the years, financial professionals around the world have looked to the Wiley Finance series and its wide array of bestselling books for the knowledge, insights, and techniques that are essential to success in financial markets. As the pace of change in financial markets and instruments quickens, Wiley Finance continues to respond. With critically acclaimed books by leading thinkers on value investing, risk management, asset allocation, and many other critical subjects, the Wiley Finance series provides the financial community with information they want. Written to provide professionals and individuals with the most current thinking from the best minds in the industry, it is no wonder that the Wiley Finance series is the first and last stop for financial professionals looking to increase their financial expertise.

New Evidence on the Market Impact of Convertible Bond Issues in the U.S.

New Evidence on the Market Impact of Convertible Bond Issues in the U.S.
Author: Bala Arshanapalli
Publisher:
Total Pages: 45
Release: 2004
Genre:
ISBN:
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This study provides new evidence on the market impact of new issues of convertible bonds of U.S. listed firms. We examine on the market reaction surrounding the announcement dates and the issue dates of convertible bonds. The evidence suggests that firms experience negative abnormal returns around the announcement of new issues of convertible bonds. Abnormal returns are found to be a function of firm market value, price-to-book ratio, issue size, as well as the state of the overall market. Simulations using convertible arbitrage strategies suggests that investors could take advantage of these negative abnormal returns by going long on the firm's convertible bond and short on the firm's stock at the issue date.

Issuing a Convertible Bond with Call-Spread Overlay

Issuing a Convertible Bond with Call-Spread Overlay
Author: Samira Shirgir
Publisher:
Total Pages: 81
Release: 2015
Genre:
ISBN:
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In recent years companies issuing convertible bonds enter into some transactions simultaneously in order to mitigate some of the negative impacts of issuing convertible bonds such as the dilution of existing shares. One of the popular concurrent transactions is a call-spread overlay which is intended to reduce the dilution impact. This thesis explores the motivation for using these combined transactions from the perspective of the issuers, investors, and underwriters. We apply a binomial method to price the convertible bonds with call-spread which are subject to default risk. Based on previous empirical studies convertible bond issuers experience a drop in their stock price due to the activities of convertible bond arbitrageurs when the issuance of convertible bonds is announced. We propose a model to estimate the drop in the stock price due to convertible bond arbitrage activities, at the time of planning the issue and designing the security that will be offered. We examine the features of the model with simulated and real-world data.