The fluctuating maturities of convertible bonds

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    Author
    Verwijmeren, P; Yang, A
    Date
    2020-06-01
    Source Title
    Journal of Corporate Finance
    Publisher
    Elsevier
    University of Melbourne Author/s
    Verwijmeren, Patrick
    Affiliation
    Finance
    Metadata
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    Document Type
    Journal Article
    Citations
    Verwijmeren, 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 Status
    This item is embargoed and will be available on 2022-06-01
    URI
    http://hdl.handle.net/11343/258569
    DOI
    10.1016/j.jcorpfin.2020.101576
    Abstract
    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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