Keywords

Convertibles, Performance, Preferred stocks, Pricing

Abstract

This dissertation is a comprehensive study of convertible-preferred-stock pricing and performance following issuance. It is the first major academic study that identifies significant abnormal performance of corporate contingent claims following issuance. The research utilizes both option-based contingent claims valuation models and econometric techniques to investigate the sources of superior investment performance of convertible securities as an asset class that has persisted for the past thirty years. Two main issues are examined: potential underpricing of convertible preferred stocks at issuance and their subsequent investment performance. Underpricing is examined based on a robust contingent-claims valuation model. Using two samples of convertible preferred stock offerings (24 issues, 12,051 observations and 69 issues, 28,831 observations respectively), the study provides evidence of statistically and economically significant underpricing at issuance that ranges from 2.9% to 1.4% and persists from the first day of convertible trading up to six months following issuance. Underpricing is invariant to convertible ratings and the exchange where the issues are traded. It is found, however, that, large and mid cap issues are more likely to be underpriced than small cap convertibles. Also, the offerings that are underwritten by non-reputable investment bankers are more likely to be underpriced than those underwritten by reputable investment bankers.

Notes

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Graduation Date

2004

Semester

Summer

Advisor

Ramanlal, Pradipkumar

Degree

Doctor of Philosophy (Ph.D.)

College

College of Business Administration

Department

Finance

Degree Program

Finance

Format

application/pdf

Identifier

CFE0000079

URL

http://purl.fcla.edu/fcla/etd/CFE0000079

Language

English

Release Date

January 2008

Length of Campus-only Access

None

Access Status

Doctoral Dissertation (Open Access)

Subjects

Business Administration -- Dissertations, Academic; Dissertations, Academic -- Business Administration

Restricted to the UCF community until January 2008; it will then be open access.

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