Mandatory Convertibles and Shareholders Incentives

Huerga, Ángel and Rodríguez Monroy, Carlos (2019). Mandatory Convertibles and Shareholders Incentives. In: "13th International Conference on Industrial Engineering and Industrial Management - XXIII Congreso de Ingeniería de Organización (CIO 2019)", 11-12 Jul 2019, Gijón, España. ISBN 978-84-17445-38-6. pp. 1-8.

Description

Title: Mandatory Convertibles and Shareholders Incentives
Author/s:
  • Huerga, Ángel
  • Rodríguez Monroy, Carlos
Item Type: Presentation at Congress or Conference (Article)
Event Title: 13th International Conference on Industrial Engineering and Industrial Management - XXIII Congreso de Ingeniería de Organización (CIO 2019)
Event Dates: 11-12 Jul 2019
Event Location: Gijón, España
Title of Book: 13th International Conference on Industrial Engineering and Industrial Management - XXIII Congreso de Ingeniería de Organización
Date: 2019
ISBN: 978-84-17445-38-6
Subjects:
Freetext Keywords: Mandatory Convertible Bonds; Shareholder Value; Risk Shifting; Agency Dilemma; Real Options
Faculty: E.T.S.I. Industriales (UPM)
Department: Ingeniería de Organización, Administración de Empresas y Estadística
Creative Commons Licenses: Recognition - No derivative works - Non commercial

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Abstract

A relative large proportion of the academic literature about the agency dilemma studies corporate governance or the instruments that can balance the incentives of shareholders and debt holders. This article studies a balance sheet instrument, the mandatory convertible bond, as a means to increase the value for shareholders, without reducing the bondholders claim. Following the options valuations theories, one way to increase the value for shareholders is to increase the risk of the firm that in turn reduces the value for bondholders. The results show that after the issuance of mandatory convertible bonds, companies reduce the return required by bondholders and at the same time increase its equity volatility and the potential shareholder value.

More information

Item ID: 65344
DC Identifier: http://oa.upm.es/65344/
OAI Identifier: oai:oa.upm.es:65344
Official URL: https://www.cio2019.org/en/
Deposited by: Memoria Investigacion
Deposited on: 18 Nov 2020 16:15
Last Modified: 18 Nov 2020 16:15
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