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- Title
Stock Price Response to Calls of Convertible Bonds: Still a Puzzle?
- Authors
Brick, Ivan E.; Palmon, Oded; Patro, Dilip K.
- Abstract
The liquidity hypothesis predicts negative abnormal returns around the conversion-forcing call announcements of convertible bonds, followed by a price recovery. We find the former but not the latter. The liquidity hypothesis also implies that the abnormal returns during the announcement and the post-announcement periods should be related to proxies for the stock's liquidity. Again, our findings do not support these implications of the liquidity hypothesis. We conclude that the reason for the negative abnormal returns around the announcement of a conversion-forcing call needs further examination.
- Subjects
FINANCIAL management; STOCK prices; CONVERTIBLE bonds; LIQUIDITY (Economics); BOND prices; CONVERTIBLE securities; PROXY statements
- Publication
Financial Management (Wiley-Blackwell), 2007, Vol 36, Issue 2, p65
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2007.tb00087.x