Short-selling pressure and last-resort debt finance: evidence from 144A high-yield risk-adjusted debt

Kelvin Jui Keng Tan, Jia Min Lee, Robert W. Faff

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

This study examines why non-financial publicly traded firms knowingly issue wealth destroying Rule 144A debt, which is associated with a negative announcement return and a higher yield. We provide a plausible ‘demand-side’ explanation (i.e. last-resort debt financing) for the motivation for issuing such debt. We also provide evidence as to what drives this negative reaction. Our findings suggest that the negative market impact is mainly driven by short-selling pressure from convertible bond arbitrageurs.

Original languageEnglish
Pages (from-to)1149-1185
Number of pages37
JournalAccounting and Finance
Volume56
Issue number4
DOIs
Publication statusPublished - 1 Dec 2016
Externally publishedYes

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