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The Motives for the Issuance of Callable Convertible Bonds by American and European Companies – a Comparative Analysis
Abstract
The aim of the article is to identify the reasons for using the call option in convertible debt financing and to find out whether these motives differ across countries. The analysis encompasses 299 issues of callable convertible bonds carried out by American and European companies from the service and manufacturing sector between 2004 and 2014. It turns out that both American and European firms are likely to use the call provision in order to avoid redeeming debt at maturity by either ensuring them a right to repay nominal value of bonds before maturity (American firms) or by forcing an early conversion on bondholders (European firms). Moreover, it seems that companies use callable hybrid debt to raise capital for financing new investment projects which may help them to increase their financial results.
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DOI: http://dx.doi.org/10.17951/h.2016.50.4.193
Date of publication: 2017-02-20 17:31:15
Date of submission: 2016-06-15 21:24:29
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