Determinants of the Issuance of Put/Call Convertibles in the Non-Financial Sector of the US Market

Damian Kaźmierczak; Jakub Marszałek

doi:10.2478/cer-2014-0017

Authors

Damian Kaźmierczak University of Łódź, Faculty of Management, Department of Business Management
Jakub Marszałek University of Łódź, Faculty of Management, Department of Business Management

DOI:

https://doi.org/10.2478/cer-2014-0017

Keywords:

financing, convertible bonds, put/call provisions, U.S. market

Abstract

The aim of this article is to characterize and show the differences between issuers of ordinary convertibles and convertibles with attached put/call provisions (put/call convertibles). The research was carried out on a sample of 379 firms in the US market, outside the financial sector, between 2002 and 2011. It turns out that the issuers of put/call convertibles are the companies with a higher risk exposure, associated with, inter alia, a higher level of indebtedness and worse ratio between the issue value to the fixed assets value. Adding the put/call provisions is aimed at decreasing issuers’ risk exposure, which may increase the market demand for this type of convertible securities.

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