Abstract:Using methodologies developed by Barber and Lyon (1996 and 1997 ), we examine the long-run operating performance and stock returns of firms around in-the-money calls of convertible preferred stock. Our study intends to be a direct test of the hypothesis that managers call in-the-money convertibles when they view a decline in the firms' performance. We find no evidence that calling firms underperform non-calling benchmark firms. On the contrary, we find mild evidence that the post-call operating performance of … Show more
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