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Presentation
Does Earnings Attributes Impact the Cost of Convertible Debt?
2013 American Accounting Association Annual Conference (2013)
  • Carolyn M. Callahan, The University of Memphis
  • Stephanie Hairston, Georgia Southern University
  • Ting Chiao Huang, National Cheng Kung University
Abstract
This paper examines the association between the cost of convertible debt and earnings quality based on well-known attributes. Using a large sample of U.S. convertible debt issued during 1983 to 2010, we find consistent evidence that better earnings quality is related to lower cost of convertible debt. Generally, accounting-based earnings quality is more important than market-based earnings quality in determining the cost of convertible debt. Moreover, accrual quality is found to have the highest effects among the seven earnings attributes examined. Further analysis suggests that the association between costs of convertible debt and earnings quality is more pronounced for publicly offering convertible debts, indicating public investors’ inflexibility and reliance on price terms to adjust their risks. Our results are robust to distinguishing debt-like and equity-like convertible debts and alternative measurement of earnings quality and costs of convertible debt. Our findings should be of interest to the academy, practitioners, and policy makers.
Keywords
  • Earnings attributes,
  • Cost of convertible debt,
  • Convertible debt,
  • Earnings quality
Disciplines
Publication Date
August 5, 2013
Location
Anaheim, California
Citation Information
Carolyn M. Callahan, Stephanie Hairston and Ting Chiao Huang. "Does Earnings Attributes Impact the Cost of Convertible Debt?" 2013 American Accounting Association Annual Conference (2013)
source:http://www2.aaahq.org/AM2013/abstract.cfm?submissionID=1261
Available at: http://works.bepress.com/stephanie-hairston/6/