VALUATION OF PRIMARY ISSUE CONVERTIBLE BONDS

Little empirical evidence is available on the nature of the trade‐offs between the debt‐ and equity‐like components of convertible bonds. Such information would be useful to firms considering the issuance of convertible bonds. Furthermore, complete understanding of the leverage implications of convertible bond issuance depends on the market's view of the proportions of the implicit debt/equity mix. The current study develops a two‐equation model...