The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Convertible Bond Design and Capital Investment: The Role of Call Provisions
Published: 11/27/2005 | DOI: 10.1111/j.1540-6261.2004.00636.x
Timo P. Korkeamaki, William T. Moore
If firms issue convertible securities to facilitate sequential investment, the securities should be engineered to give sufficient flexibility to accommodate timing of follow‐on investment. We examine call provisions in convertible bonds and argue that firms with investment options expected to expire sooner (later) will offer weaker (stronger) call protection. We find that issues with weak or no call protection are offered by firms that invest greater amounts soon after issuance than those issuing convertibles with strong protection. Moreover, capital expenditure levels during the 5‐year period following issuance are inversely related to the length of call‐protection periods.
A Re‐Examination of Shareholder Wealth Effects of Calls of Convertible Preferred Stock
Published: 12/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02661.x
ERIC L. MAIS, WILLIAM T. MOORE, RONALD C. ROGERS
Common stock price reactions to announcements of 67 calls of in‐the‐money convertible preferred stocks are examined, and a significant average abnormal return of −1.6 percent is documented. The finding is robust to the choice of estimation period and the assumed return‐generating process. Annual dividend obligations for the called preferred issues in the sample typically are greater than the dividends for the common shares into which they are converted, and announcement‐period abnormal returns are negatively correlated with changes in dividends. Moreover, calls that result in dilution of voting rights appear to have greater adverse valuation effects than calls that do not alter voting rights concentration.
Security Pricing and Deviations from the Absolute Priority Rule in Bankruptcy Proceedings
Published: 12/01/1990 | DOI: 10.1111/j.1540-6261.1990.tb03723.x
ALLAN C. EBERHART, WILLIAM T. MOORE, RODNEY L. ROENFELDT
Claims ultimately awarded to shareholders of firms in reorganization were examined for a sample of 30 filings under the 1978 Bankruptcy Reform Act. We measured the amount paid to shareholders in excess of that which they would have received under the absolute priority rule and found that this amount represents, on average, 7.6% of the total awarded to all claimants. Evidence is also reported that common share values reflect a significant proportion of value ultimately received in violation of absolute priority, suggesting that deviations from the rule were expected by the equity markets.