Long-Run Abnormal Performance following Convertible Preference Share and Convertible Bond Issues: New Evidence from the United Kingdom
Journal
International Review of Economics and Finance
Journal Issue
15
Pages
97-117
Date Issued
2006
Author(s)
Abhay Abhyankar
Abstract
We study the long-run abnormal performance of a sample of U.K. firms following convertible preference share and convertible bond issues over the period 1982-1996. We are the first to study, as far as we are aware, the long-run stock price performance of firms following convertible preference share issues. Furthermore, our data set has been extracted from original sources and thus mitigates to some extent concerns about data-snooping biases. We measure long-run abnormal performances both prior to and following the issuance of convertible bonds and convertible preference shares and by the method of the issue used. Using a range of metrics to assess the robustness of long-run abnormal performance, we find evidence of pre-offer overperformance and post-offer underperformance using buy-and-hold abnormal returns (BHARs). However, post-offer underperformance is statistically significant in the case of convertible preference share issuers. Implementing a calendar-time approach, we again find underperformance for convertible preference share issuers. We do not find any evidence of long-run stock price underperformance for firms following the issuance of convertible bonds. © 2004 Elsevier Inc. All rights reserved.
Type
journal article