Convertible Bonds as "Back Door" Equity Financing / Jeremy C. Stein.

By:

Stein, Jeremy C

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4028.Publication details: Cambridge, Mass. National Bureau of Economic Research 1992.Description: 1 online resource: illustrations (black and white)Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: This paper argues that corporations may use convertible bonds as an indirect (albeit possibly risky) method for getting equity into their capital structures in situations where adverse selection problems make a conventional stock issue unattractive. Unlike other theories of convertible bond issuance, the model of this paper highlights: 1) the importance of call provisions on convertibles; and 2) the significance of costs of financial distress to the Information content of a convertible issue.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w4028 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w4025 A Cross-Sectional Test of a Production-Based Asset Pricing Model /	nber w4026 The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Engogenous /	nber w4027 Training, Wage Growth and Job Performance: Evidence From a Company Database /	nber w4028 Convertible Bonds as "Back Door" Equity Financing /	nber w4029 National Origin and Immigrant Welfare Recipiency /	nber w4030 Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment /	nber w4031 Diminished Expectations of Nuclear War and Increased Personal Savings: Evidence From Individual Survey Data /	Next

March 1992.

This paper argues that corporations may use convertible bonds as an indirect (albeit possibly risky) method for getting equity into their capital structures in situations where adverse selection problems make a conventional stock issue unattractive. Unlike other theories of convertible bond issuance, the model of this paper highlights: 1) the importance of call provisions on convertibles; and 2) the significance of costs of financial distress to the Information content of a convertible issue.