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An Analysis of the Wealth Effects of Japanese Offshore Dollar-Denominated Convertible and Warrant Bond Issues

Published online by Cambridge University Press:  06 April 2009

Jun-Koo Kang ,
Yong-Cheol Kim ,
Kyung-Joo Park  and
René M. Stulz
Jun-Koo Kang
Affiliation:
College of Business Administration, University of Rhode Island, Kingston, RI 02881
Yong-Cheol Kim
Affiliation:
College of Commerce and Industry, Clemson University, Clemson, SC 29634
Kyung-Joo Park
Affiliation:
Graduate School of Business Administration, Fordham University, New York, NY 10023
René M. Stulz
Affiliation:
College of Business, Ohio State University, Columbus, OH 43210
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Abstract

Offshore dollar-denominated equity-linked issues were a more important source of funds for Japanese companies during the 1980s than domestic equity and straight debt issues combined. Using a sample of Japanese equity-linked offshore issues from 1977 to 1989, we find that the announcement of these issues is accompanied by a significant positive abnormal return. This contrasts with evidence that U.S. equity-linked issues have a significant negative stock price reaction. We provide an explanation for the difference in stock price reactions between U.S. and Japanese issues that is based on the greater influence on managers' security issue decisions of long-term investors and banks in Japan than in the U.S.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 30 , Issue 2 , June 1995 , pp. 257 - 270
Copyright
Copyright © School of Business Administration, University of Washington 1995

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