ON THE INFORMATION-CONTENT OF CALLS OF CONVERTIBLE SECURITIES

Negative stock price reactions to conversion-forcing calls of converti ble bonds and preferred stocks are re-examined, and most of the sample firms are shown to exhibit full price recovery by the end of the conv ersion period. In addition, analysts' earnings forecasts, both short-t erm and long-term, are found to be revised upward following call annou ncements for convertible bonds and preferred stocks. The combined find ings cast doubt on the established belief that such capital structure decisions signal negative information about firm value.