If firms issue convertible securities to facilitate sequential investment, the securities should be engineered to give sufficient f lexibility 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.MOST CONVERTIBLE BONDS AND NOTES have call provisions, and most provisions have important qualifications or protection. Broadly speaking, convertibles may have absolute protection (not callable), hard call protection (noncallable for a specified period), provisional or soft call protection (callable if certain conditions on stock price are met), or no protection (callable anytime). In this study, we investigate the relations between the strength and length of call protection and firms' subsequent investment behavior.Our hypothesis is a natural implication of the sequential financing motive for convertible debt financing. For example, in Mayers (1998), firms finance their planned multistage investment programs with convertibles. Besides Mayers' sequential financing motive, other explanations for convertible financing include theories based on post-issuance risk shifting (Jensen and Meckling (1976), Green (1984)), heterogeneous risk assessment (Brennan and Schwartz (1988)), and asymmetric information (Stein (1992)). In a recent study, Lewis, Rogalski, and Seward (2001) offer an explanation based on equity market rationing.Stein's (1992) model has at least an implicit role for callability, but we believe Mayers' explanation has direct implications for the nature of call provisions that we examine here. He argues that convertible financing is well suited to * Korkeamaki is with Gonzaga University and Moore is with the University of South Carolina.We thank an anonymous reviewer for careful guidance from which the study has benefited greatly. We also wish to express our sincere gratitude to for helpful comments and guidance, and to Ellen Roueche for help in preparation of this manuscript. Special thanks to the editor, Rick Green, for his comments and guidance. We gratefully acknowledge valuable comments from participants at a 2002 joint seminar of the Swedish School of Economics and Business Administration and the Helsinki School of Economics. 392The Journal of Finance circumstances where a firm requires immediate financing to undertake a project that is expected to be followed by a second project at some (uncertain) time in the future.We argue that firms facing investment options that are expected to mature shortly after issuance will offer convertibles with little or no call protection, and those issues with protection features will have short pr...

Changes in taxation of corporate dividends offer excellent opportunities to study dividend clientele effects. We explore payout policies and ownership structures around a major tax reform that took place in Finland in 2004. Consistent with dividend clienteles affecting firms' dividend policy decisions, we find that Finnish firms altered their dividend policies based on the changed tax incentives of their largest shareholders. While firms adjust their payout policies, our results also indicate that ownership structures of Finnish firms also changed around the 2004 reform, consistent with shareholder clienteles adjusting to the new tax system.

"A tremendous amount of research examines US mutual funds, but fund markets also thrive in other countries. However, research about these fast growing markets is lacking. This study addresses Finnish funds. Fast growth of the Finnish fund industry, strong bank dominance in the industry and recent EU membership make it an interesting market to examine. The Finnish fund market is also of particular interest since it had the fastest growth among the EU countries during 1996-2000. We find evidence that bank-managed and older funds charge higher expenses but investors are not compensated for paying higher expenses with higher risk-adjusted returns, suggesting a potential agency problem. Overall, Finnish fund expenses have decreased over time, consistent with EU membership reducing market segmentation and generating competition." Copyright Blackwell Publishers Ltd, 2004.

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