TY - JOUR
T1 - An analysis of exchangeable debt offers
AU - Ghosh, Chinmoy
AU - Varma, Raj
AU - Woolridge, J. Randall
N1 - Funding Information:
*We have benefited from discussions with David Kidwell, Wayne Mikkelson, James Miles, Thomas O’Brien, and Samuel Szewczyk. We are especially indebted to Richard Ruback and Clifford Smith (the editors) for many helpful suggestions. Ghosh’s financial support was provided by the Corporate Research Associates Summer Grant, School of Business Administration, University of Connecticut. Varma’s financial support was provided by a Summer Research Grant from the College of Business and Economics at the University of Delaware. Woolridge was supported by Goldman Sachs & Co., and the Frank P. Smeal Endowed University Fellowship, The Smeal College of Business Administration, Pennsylvania State University. Adam Golden and Brian McGann provided significant data collection assistance.
PY - 1990
Y1 - 1990
N2 - Exchangeable debt is convertible into the common stock of a target firm in which the issuing firm has an ownership position. It signifies a potential change in the issuing firm's asset composition through the divestiture of the ownership stake in the target firm. We find that announcements of exchangeable debt offers are associated with insignificant abnormal returns for the shareholders of issuing firms. The target firm's share price declines, however, when an exchangeable debt offer is announced. This result is consistent with the offer's potential to reduce the ownership concentration of the target firm's common stock.
AB - Exchangeable debt is convertible into the common stock of a target firm in which the issuing firm has an ownership position. It signifies a potential change in the issuing firm's asset composition through the divestiture of the ownership stake in the target firm. We find that announcements of exchangeable debt offers are associated with insignificant abnormal returns for the shareholders of issuing firms. The target firm's share price declines, however, when an exchangeable debt offer is announced. This result is consistent with the offer's potential to reduce the ownership concentration of the target firm's common stock.
UR - http://www.scopus.com/inward/record.url?scp=38249018032&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=38249018032&partnerID=8YFLogxK
U2 - 10.1016/0304-405X(90)90055-5
DO - 10.1016/0304-405X(90)90055-5
M3 - Article
AN - SCOPUS:38249018032
SN - 0304-405X
VL - 28
SP - 251
EP - 263
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 1-2
ER -