Disappearing Call Delay and Dividend-Protected Convertible Bonds

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17 Citations (Scopus)

Abstract

Firms do not historically call their convertible bonds as soon as conversion can be forced. A number of 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, dividend protection of convertible bond issues. Dividend protection means that the conversion value of the convertible bond is unaffected by dividend payments and thus dividend-related rationales for call delay become moot. We document that call delay is near zero for dividend-protected convertible bonds.
Original languageEnglish
Pages (from-to)195-223
Number of pages29
JournalThe Journal of Finance
Volume71
Issue number1
DOIs
Publication statusPublished - 2016

Research programs

  • ESE - F&A

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