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

doi:10.1111/acfi.12125

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 journal › Article › Research › peer-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 language	English
Pages (from-to)	1149-1185
Number of pages	37
Journal	Accounting and Finance
Volume	56
Issue number	4
DOIs	https://doi.org/10.1111/acfi.12125
Publication status	Published - 1 Dec 2016
Externally published	Yes

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

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