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This study proposes an alternative perspective on why firms issue convertible debt, to supplement the largely theoretical motives identified in the existing literature. It hypothesises that the separate presentation of convertible debt into its equity and liability components has economic consequences and advantage that explain why firms issue convertible over non-convertible debt, consistent with the debt covenant hypothesis. The purpose of this paper is to address the proposed perspective and hypothesis.

Data on convertible debt, gearing (debt assets and debt equity), debt issuance and retirement, etc. were collected for a sample of 1,104 firms listed on Bursa Malaysia. Regression analyses were then used to assess the hypotheses on how gearing affects the use of convertible debt and the impacts of its use on changes in gearing over the financing cycle.

Firms with higher gearing, and possibly those close to violating debt covenants, are more likely to issue convertible than non-convertible debt. In addition, the use of convertible rather than non-convertible debt both reduces the increase in gearing when debts are issued and leads to a larger decrease in gearing during debt retirements via conversion.

These effects on gearing provide firms with additional financial flexibility and enhance firms' capacity to borrow more from other sources, a lower-debt advantage.

This study demonstrates the informational role of financial reporting in addressing the stewardship emphasis, as part of the decision usefulness objective of financial reporting in the Conceptual Framework for Financial Reporting.

We provide evidence of stock market performance prior to announcements of the assuance or retirement of securities which is consistent with Myers and Majluf [1984] and Miller and Rock [1985]. Stocks of firms issuing seasoned common equity are significantly over‐valued in the market prior to the issue, but in the year following, decline to their original level. Stocks of firms issuing convertible debt also are over‐valued, but to a lesser degree than that of firms issuing seasoned equity. Stock of firms issuing straight debt appears to be neither over‐valued nor undervalued. The after‐market firm performance, measured by earnings, cash flows or dividends, is consistent with Miller and Rock. We document a decline in after‐market performance for firms issuing convertible or straight debt and an improvement for those repurchasng shares. However, contrary to predictions, we find that firms issuing seasoned equity do not have lower earnings or cash flows in the following year, and increase their rate of dividend payment as well. We document evidence indicating that firms issue equity to maintain or increase dividends. The market anticipates the dividend increase and shows no response to announcements of dividend changes following an equity issue. However, we are unable to explain why the market reacts in such a negative manner to equity issues, when the after‐market performance of the firm is as expected.

The purpose of this study is to examine the impact of interest rates on the size and the maturity choice of a syndicated bank loan. In addition, it attempts to determine the long‐run impact of a syndicated loan on the borrower's capital structure.

The paper uses a sample of 6,903 syndicated bank loans in the USA, covering the period 1984‐2004. First, all syndicated loans are categorized into two groups: loans in periods of increasing interest rates, and loans in periods of decreasing rates. Then, non‐parametric tests are performed to compare the characteristics of the two groups, including the proceeds from the loans, and robust regressions are used to examine the impact of the interest rates on the maturity choice. Finally, robust regressions are employed to examine the long‐run impact of the interest rates on the borrowers' leverage ratios.

On the whole, the results reject the market timing theory of capital structure for syndicated bank loans. Firms in the two groups borrow in similar amounts, and in the long run, the difference between the two groups' leverage ratios is statistically insignificant. On the other hand, firms tend to choose longer maturities when the interest rates are low compared to the rates two or three years ago.

To the best of the author's knowledge, this is the first study that links debt market conditions to the leverage ratios of firms that borrow in the syndicated bank loan market. In other words, this is the first study that tests the market timing theory of capital structure for syndicated bank loans.

The main purpose of this paper is to empirically examine how firm-specific (idiosyncratic) and macroeconomic risks affect the external financing decisions of UK manufacturing firms. The paper also explores the effect of both types of risk on firms' debt versus equity choices.

The paper uses a firm-level panel data covering the period 1981-2009 drawn from the Datastream. Multinomial logit and probit models are estimated to quantify the impact of risks on the likelihood of firms' decisions to issue and retire external capital and debt versus equity choices, respectively.

The results suggest that firms considerably take into account both firm-specific and economic risk when making external financing decisions and debt-equity choices. Specifically, the results from multinomial logit regressions indicate that firms are more (less) likely to do external financing when firm-specific (macroeconomic) risk is high. The results of probit model reveal that the propensity to debt versus equity issues substantially declines in uncertain times. However, firms are more likely to pay back their outstanding debt rather than to repurchase existing equity when they face either type of risk. Of the two types of risk, firm-specific risk appears to be more important economically for firms' external financing decisions.

The findings of the paper are equally useful for corporate firms in making value-maximizing financing decisions and authorities in designing effective fiscal and monetary policies to stabilize macroeconomic conditions. Specifically, the findings emphasize on the stability of the overall macroeconomic environment and firms' sales/earnings, which would result stability in firms' capital structure that help smooth firms' investments and production.

Unlike prior empirical studies that mainly focus on examining the impact of risk on target leverage, this paper attempts to examine the influence of firm-specific and macroeconomic risk on firms' external financing decisions and debt-equity choices.

The focus of this paper is on the problem of managerial opportunism in the corporate governance of UK quoted property companies. Agency conflicts exist between firm managers and owners because of the separation of ownership from management. Consequently, managers pursue activities that enhance their interests rather than that of the shareholders’. The empirical investigation of this paper is divided into two sections. The first part examines the ownership structure of 83 UK quoted property companies between 1989 and 1995, revealing that close to a quarter of the common shares issued by the companies are held by the managers. The gap between ownership and management appears to increase with firm size, risk and growth rate but decrease with corporate performance. In the second section, logit modeling is employed to examine 110 security issues of the companies during the study period. The evidence shows that ownership structure has an influence on the debt‐equity choice of property companies. Consistent with the findings of previous studies, the study also reveals that the capital structure choice is dictated to a large extent by company size, issue size, and condition of the security market. The empirical analysis also suggests that property companies make their financing decisions as though they have a target capital structure in mind.

The fundamental theory of Modigliani and Miller (1958) states that a firm's financing decisions are independent from the firm's value. Nevertheless, several empirical studies as well as theoretical approaches from the past decade impugn this relation for real markets with their immanent inefficiencies. However, these questions are rather than academic in nature: Especially the influence of macroeconomic conditions on the market perception of debt issues is from high economic importance, since the need for new liquidity usually becomes even more urgent when the economic conditions worsen.

This paper analyzes the reaction of shareholders to the issue of debt by Latin American firms under special consideration of the macroeconomic sentiment. To do so, a sample of debt issued by Latin American companies between 2003 and 2010 is empirically examined through an event study.

The authors empirically demonstrate that specifically in Latin America, debt issuing companies show a significant underperformance during recessionary periods and an overperformance during nonrecessionary periods. These findings differ from previous results for mature capital markets. The authors conclude that not only the overall economic conditions matter to explain stock market reactions on bond issues but also the maturity of the corporate debt market plays an important role.

The authors provide first evidence that the previously described changes in the returns on specific stocks depending on the economic sentiment (Baker and Wurgler, 2006) are under certain conditions also present in the market for corporate debt.

The purpose of this paper is to identify possible tax synergies from acquisitions when the acquiring firm gains a non‐debt tax shield (NDTS) not directly associated with its own past performance, or a windfall NDTS. One possible benefit of a windfall NDTS is reduced reliance on interest tax shields to lower the firm's marginal tax rate (MTR).

This paper tests the likelihood of issuing debt following acquisitions of windfall non‐debt tax attributes with logistic regressions. Both acquirers and targets are publicly held US firms. Acquisitions are completed from 1987 to 2003, and debt issues are observed following the deal. Target firm tax attributes are defined as the total tax spread, tax loss carryforward (TLCF), and the MTR.

Target firm tax spread and TLCFs are inconsequential to the acquirer's likelihood of issuing future debt, suggesting that tax synergies are relatively unimportant motives for acquisitions. As predicted, the target firm MTR is not significant to acquirer debt issues.

This paper makes several contributions. First, the notion of tax synergies from acquisitions is unresolved. This paper continues the search for tax synergies in acquisitions by examining the importance of acquired NDTS in the post‐acquisition period. Second, this paper examines the influence of NDTS on debt issuance in a post‐event framework. Third, this paper provides additional evidence that corporate managers have leverage targets.

In this study we analyze the determinants of the type and structure of debt included in dual offerings of debt and equity. Our sample consists of 54 dual offerings of convertible bond and common stock (CBCS) and 258 dual offerings of straight bond and common stock (SBCS). We find that firms with high asset substitution problems are more likely to issue CBCS offerings instead of SBCS offerings. These firms are also more likely to include convertible bonds with a high probability of conversion in the issue. The probability of CBCS offerings is higher for firms with low information asymmetry and during high interest rate periods. We also find that the announcement returns of CBCS offerings are lower than the returns of SBCS offerings.

This paper aims to investigate how firms from emerging economies choose among different international bond markets: global, US144A and Eurobond markets. The authors explore if the ranking in regulatory stringency –global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – leads to a segmentation of borrowers.

The authors use a novel data set from emerging economy firms, treating them as consolidated entities. The authors also obtain descriptive evidence and perform univariate non-parametric analyses, conditional and multinomial logit analyses to study firms’ marginal debt choice decisions.

The authors show that firms with poorer credit quality, less ability to absorb flotation costs and more informational asymmetries issue debt in US144A and Eurobond markets. On the contrary, firms issuing global bonds – subject to full Securities and Exchange Commission requirements – are financially sounder and larger. This exercise also shows that following the global crisis, firms from emerging economies are more likely to tap less regulated debt markets.

This is, to the authors’ knowledge, the first study that examines if the ranking in stringency of regulation – global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – is consistent with an ordinal choice by firms. The authors also explore if this ranking is monotonic in all determinants or there are firm-specific features which make firms unlikely to borrow in a given market. Finally, the authors analyze if there are any changes in the debt-choice behavior of firms after the global financial crisis.

The purpose of this paper is to investigate the role of “soft information” in firms’ debt issue and capital structure choices, and present a new model reconciling the gap between theories of capital structure and empirical findings.

The paper develops an analytical model of debt issues under asymmetric information in a setting where, in addition to observing the amount of debt the firm issues, outside investors obtain “soft information” signals through their own information production or noisy voluntary disclosures made by the firm. This paper analyzes the benefit and cost for the firm's debt issue decisions in this setting, and specifies the effect of soft information on these decisions.

If sufficiently precise soft information is available to outside investors, the firm's debt issue behavior is significantly altered relative to that in existing models. In particular, an inverted‐U shape relationship is found between the intrinsic value of the firm and the amount of debt it issues. Moreover, there is a negative relationship between the amount of debt the firm issues and the precision of soft information. Further, it is found that firms about which outside investors receive more favorable soft information issue less debt.

The model predicts an inverted‐U shape relationship between firms’ debt ratios and operating performance. It also predicts that firms about which outside investors receive more favorable or more precise soft information have lower debt ratios on average. A rationale is provided for the existence of firms’ investor relations departments.

Firms’ capital structure choices remain a topic of significant importance. This paper incorporates the soft informations into firms’ debt issue decisions and proposes a new model of capital structure that generates insights into firms’ financing decisions and disclosure decisions, as well as information production by outside investors.