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Volume 11
Issue 2
Online publication date 2015-07-10
Title Design of convertible debt financing - some observations from the American market
Author Jakub Marszałek
A convertible bond may be an attractive financial instrument that helps to achieve the optimal capital structure of a company. In this paper, we analyze 562 issues of  bonds from the American market between 2002-2013. Using  regression trees analysis, we give some hints with respect to the design of convertible debt financing, which is the main goal of the paper, considering the most important characteristics of the issuers’ financial standing and the parameters of issued convertibles. Our research let us  formulate a few conclusions. Firstly, we  identified some relationships between a conversion premium, a conversion period and a conversion ratio applied by issuers. Secondly, it turned  out that most of the issuer’s financial characteristics  were not statistically significant for the issued convertibles. Finally, we found out  that the share of fixed assets in  the balance sheet amount seems to be one of the most important factors determining the internal structure of issued hybrid instruments, which supports the assets substitution theory.
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Keywords Capital structure, financing, convertible bond, American company, assets substitution theory
Pages 64-75
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