| Over the last two decades convertible debt issues have been steadily increasing in both frequency and magnitude and several high volume issuance periods. Although convertible debt issuance is inherently influenced by debt and equity market volatilities, the convertible market has been shown to have an independent presence in terms of issuance volume, issue design and market participants.Are concerns of asset substitution, risk uncertainty, or asymmetric information the primary factors in convertible debt design, timing and placement? This paper aims to examine how the design of convertible bonds and the characteristics of convertible issuers shift over time and under different market conditions. I find that design features of convertible issues are not chosen independent to broader convertible debt markets conditions or firm-specific financial constraints. I also identify a strong relationship between private-placement activity and convertible debt issues designed with more equity-issuance characteristics. |
