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

Rights statement
Awarding institution
  • University of Strathclyde
Date of award
  • 2020
Thesis identifier
  • T15482
Person Identifier (Local)
  • 201577350
Qualification Level
Qualification Name
Department, School or Faculty
  • 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 bookrunner selection. 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 reputable bookrunners simultaneously in international convertible bond offerings.
Advisor / supervisor
  • McColgan, Patrick
  • Marshall, Andrew, (Andrew P.)
Resource Type
  • This thesis was previously held under moratorium from 10 February 2020 until 10 February 2022.
Date Created
  • 2020
Former identifier
  • 9912789292102996