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- Title
Callable Bonds Revisited.
- Authors
Banko, John C.; Lei Zhou
- Abstract
In light of the dramatic changes in the callable bond market, we reexamine the determinants of callable bonds. Using data from 1980-2003, we find that callable bonds are often issued by firms with both information asymmetry and underinvestment problems. However, risk-shifting does not appear to be a major factor. Furthermore, we find that interest rate hedging is an important factor for investment-grade bonds and when interest rates are high but not so for below-investment-grade bonds or when rates are low.
- Subjects
CALLABLE securities; BOND market; BONDS (Finance); PUBLIC debts; HEDGING (Finance); INTEREST rate risk; INFORMATION asymmetry; INVESTMENTS; BOND insurance; MANAGEMENT
- Publication
Financial Management (Wiley-Blackwell), 2010, Vol 39, Issue 2, p613
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2010.01086.x