| Article ID: | iaor201522742 |
| Volume: | 6 |
| Issue: | 4 |
| Start Page Number: | 323 |
| End Page Number: | 332 |
| Publication Date: | Dec 1983 |
| Journal: | Journal of Financial Research |
| Authors: | Stover Roger D |
| Keywords: | economics, statistics: empirical |
The objective of this research is to measure the interaction among pricing variables in new issues of convertible debt. In underwriting convertible debt issues, there is a simultaneous tradeoff among the conversion premium, yield, and underwriting spread. Since the three endogenous variables are interrelated, a simultaneous equation model is used to test for this interaction. Based on a sample of 264 new convertible debt offerings, the results indicate underpricing in terms of conversion premium and yield as well as simultaneous increases in yield and underwriting spread.