Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87327
Authors: 
Grundy, Bruce D.
Verwijmeren, Patrick
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper 12-060/2/DSF37
Abstract: 
Firms have not historically called their convertible bonds as soon as they could force conversion. Various explanations for the delay rely on the size of the dividends that bondholders forgo so long as they do not convert. We investigate an important change in convertible security design, namely that more than 95 percent of recent convertible bond issues are dividend-protected. Dividend protection means that the conversion value of the shares into which a bond is convertible is unaffected by dividend payments and dividendrelated rationales for call delay become moot. We document that dividend-protectedconvertibles are called as soon as conversion can be forced.
Subjects: 
Call policy
Dividend protection
Convertible securities
Security design
JEL: 
G2
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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