The Importance of Call Delays and Cash Flow Positions in Evaluating the Information Content of Convertible Preferred Stock Calls

Fields, L. Paige; Wilkins, Michael S.; Mais, Eric L.

doi:10.1177/0148558x9901400204

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2004

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“…Third, we also examine calling firms’ operating performance. The current study is more closely related to Fields, Wilkins and Mais (1999). The significant difference is that we follow the Barber and Lyons methodology and examine several years of stock return performance around preferred calls.…”

Section: Introductionmentioning

confidence: 99%

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Operating Performance and Stock Returns of Firms Calling Convertible Preferred Stocks

Kadapakkam¹,

Sun

Tang

2004

Business Fin & Account

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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 calling firms is better than a carefully selected group of benchmark firms and call firms' post-call stock returns are no worse than benchmark firms. Copyright Blackwell Publishers Ltd, 2004.

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Section: Introductionmentioning

confidence: 99%

“…3 3 Fields, Wilkins and Mais (1999) also examine changes in EBIT growth and document a decline in growth rates following the call. Their control group is selected by matching SIC codes and market value of equity.…”

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confidence: 99%