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The Impact of Financial Constraints on the Convertible Bond Announcement Returns

Department of Banking and Finance, National Chi Nan University, Nantou County 545, Taiwan
International College, Guangzhou College of Commerce, Guangzhou 511363, China
Department of Finance, Asia University, Taichung City 413, Taiwan
Author to whom correspondence should be addressed.
Economies 2019, 7(2), 32;
Received: 4 January 2019 / Revised: 27 March 2019 / Accepted: 1 April 2019 / Published: 8 April 2019
(This article belongs to the Special Issue Efficiency and Anomalies in Stock Markets)
PDF [237 KB, uploaded 8 April 2019]


As of now, very few research studies have examined the effects of financial constraints on the short- and long-term performances of companies after their announcement of convertible bonds. Due to asymmetric information, previous studies consider issuance of convertible bonds as negative news. As a result, the short- and long-term performances of companies generally decline after their convertible bond announcement. This study argues that when companies have investment plans, they are expected to have higher future cash flows. They will become increasingly more valuable regardless of the fact that they raise funds through the issue of convertible bonds (due to financial constraints), positively affecting the performance of companies. The results indicate that financial constraints have no effect on short-term performance, but did have a significantly positive impact on the long-term performance of companies after their issuance of convertible bonds. View Full-Text
Keywords: convertible bond; financial constraints; stock performance convertible bond; financial constraints; stock performance
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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Chang, C.-C.; Kam, T.-Y.; Chien, C.-C.; Su, W.T. The Impact of Financial Constraints on the Convertible Bond Announcement Returns. Economies 2019, 7, 32.

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