Abstract
AbstractThe objective of this research is to measure the interaction among pricing variables in new issues of convertible debt. In underwriting convertible debt issues, there is a simultaneous tradeoff among the conversion premium, yield, and underwriting spread. Since the three endogenous variables are interrelated, a simultaneous equation model is used to test for this interaction. Based on a sample of 264 new convertible debt offerings, the results indicate underpricing in terms of conversion premium and yield as well as simultaneous increases in yield and underwriting spread.
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