The market reaction to convertible bond issues and the determinants of bookrunner selection

This thesis examines three major aspects of international convertible bond offerings, particularly the market reaction and its determinants, the determinants of bookrunner selection in underwriting market and the outcomes of bookrunnerselection. These issues are important for a corporate firm to design the best features of convertible bond underwriting contracts to enhance shareholders’ wealth and mitigate asymmetric information. These are relevant to the underwriters to understand whether informational advantage gained via reputation and geographic proximity could equip them if more competitive advantage in delivering better underwriting services. Furthermore, financial regulators are benefited from this study to better understand the underwriting market in convertible bond offerings. My research focuses on an overall sample size of 11,350 convertible bond offerings worldwide issued between 1984 and 2015. I analyse the market reaction for different countries, industrial classifications and stated purpose of proceeds following the announcements of convertible bond offerings. I regress the stock price reactions against firm-specific, issue-specific, market-specific, country-specific and investor protection-specific factors. I examine the determinants of domestic, regional and reputable bookrunner selection by regressing them on firm-specific, issue-specific and market-specific. I also examine whether bookrunners with economies of scale advantage are more likely to gain underwriting contracts in convertible bonds. The bookrunner performance is analysed based on the stock price reactions, underwriting fees and offering yields-at-issue. I further explore to investigate the outcome of bookrunner selection across different regions. The findings of this study have important implications for various strands of academic literature. I contribute to reveal that the stock prices of convertible bond issuers react differently to different countries, industrial classifications and stated purpose of proceeds. My results from regression analysis show that the different market reactions are significantly associated by firm-specific, issue-specific, market specific, country-specific and legal system factors. I also contribute to identify the underwriting preferences by corporate treasurers in hiring domestic, regional and reputable bookrunners. This helps underwriters to effectively gain underwriting contracts. This study contributes to two dominant literature on geographic proximate and reputable bookrunner selections in international convertible bond offerings. My findings provides important policy suggestions for issuers and investors to make a better evaluation on the outcomes of both geographical proximate and reputablebookrunners simultaneously in international convertible bond offerings.

Name dc:type.qualificationname

phd

Level dc:type.qualificationlevel

doctoral-pg

Grantor dc:publisher.institution

University of Strathclyde

Year dc:date.issued

2020

Author dc:creator

• Hu, Ling Tai

Advisors dc:contributor.advisor

• Marshall, Andrew (Andrew P.)
• McColgan, Patrick

DOI

10.48730/xzvf-k022

Identifier

T15482

Author Identifier

201577350

OAI identifier oai:identifier

oai:strathclyde:g158bh40z