The fluctuating maturities of convertible bonds
AuthorVerwijmeren, P; Yang, A
Source TitleJournal of Corporate Finance
University of Melbourne Author/sVerwijmeren, Patrick
Document TypeJournal Article
CitationsVerwijmeren, P. & Yang, A. (2020). The fluctuating maturities of convertible bonds. Journal of Corporate Finance, 62, https://doi.org/10.1016/j.jcorpfin.2020.101576.
Access StatusThis item is embargoed and will be available on 2022-06-01
The maturities of newly issued convertible bonds vary substantially over time. Firm-specific determinants of maturity from the straight debt literature are relevant for convertible bonds. However, the growth of the convertible arbitrage industry and the role of convertible arbitrage hedge funds have changed the importance of firm characteristics in the convertible bond market. Recently issued convertible bonds come with particularly short maturities that serve as substitutes for call provisions. This substitution implies that backdoor-equity and sequential-financing rationales for issuing callable convertible bonds are also applicable for non-callable convertibles with shorter maturities.
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