http://repub.eur.nl/res/aut/7937/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/38933/ 2012-11-01T00:00:00Z While convertible offerings announced between 1984 and 1999 induce average abnormal stock returns of -1.69%, convertible announcement effects over the period 2000-2008 are more than twice as negative (-4.59%). We hypothesize that this evolution is attributable to a shift in the convertible bond investor base from long-only investors towards convertible arbitrage funds. These funds buy convertibles and short the underlying stocks, causing downward price pressure. Consistent with this hypothesis, we find that the differences in announcement returns between the Traditional Investor period (1984-1999) and the Arbitrage period (2000-September 2008) disappear when controlling for arbitrage-induced short selling associated with a range of hedging strategies. Post-issuance stock returns are also in line with the arbitrage explanation. Average announcement effects of convertibles issued during the Global Financial Crisis are even more negative (-9.12%), due to a combination of short-selling price pressure and issuer, issue, and macroeconomic characteristics associated with these offerings. http://repub.eur.nl/res/pub/22755/ 2011-04-01T00:00:00Z Over recent years, a substantial fraction of US convertible bond issues have been combined with a stock repurchase. This paper explores the motivations for these combined transactions. We argue that convertible debt issuers repurchase their stock to facilitate arbitrage-related short selling. In line with this prediction, we show that convertibles combined with a stock repurchase are associated with lower offering discounts, lower stock price pressure, higher expected hedging demand, and lower issue-date short selling than uncombined issues. We also find that convertible arbitrage strategies explain both the size and the speed of execution of the stock repurchases. http://repub.eur.nl/res/pub/8043/ 2006-10-30T00:00:00Z Unlike their US counterparts, European convertible debt issuers tend to be large companies with small debt- and equity-related financing costs. Therefore, it is a puzzle why these firms issue convertibles instead of standard financing instruments. This paper examines European convertible debt issuer motivations by estimating a security choice model incorporating convertibles, straight debt, and equity. We find that European convertibles are used as sweetened debt, not as delayed equity. This motivation is also reflected in the highly debt-like design of most European convertible issues. In addition, we show that economy-wide and country-specific factors have a significant incremental impact on the convertible debt choice. http://repub.eur.nl/res/pub/8044/ 2006-10-30T00:00:00Z This paper hypothesizes that hot convertible debt windows represent periods with lower convertible debt-related financing costs. Supporting this premise, we find that the stock price impact of Western European convertible debt announcements is significantly less negative during hot convertible windows. Importantly, this result holds while controlling for equity market, straight debt market and macroeconomic conditions. In addition, stockholders are less sensitive to issuer- and issue-specific financing costs during hot convertible markets. Overall, these findings indicate that hot convertible markets represent windows of opportunity for convertible debt issuance. Firms with high idiosyncratic financing costs act accordingly by timing their convertible offering during a hot market.