Dividend-Protected Convertible Bonds and the Disappearance

Arbeitspapier

Firms have not historically called their convertible bonds as soon as they could force conversion. Various explanations for the delay rely on the size of the dividends that bondholders forgo so long as they do not convert. We investigate an important change in convertible security design, namely that more than 95 percent of recent convertible bond issues are dividend-protected. Dividend protection means that the conversion value of the shares into which a bond is convertible is unaffected by dividend payments and dividendrelated rationales for call delay become moot. We document that dividend-protectedconvertibles are called as soon as conversion can be forced.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 12-060/2/DSF37

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: Call policy ; Dividend protection ; Convertible securities ; Security design ; Wandelanleihe ; Dividende ; Unternehmensfinanzierung ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grundy, Bruce D. ; Verwijmeren, Patrick
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/87327