Timing of convertible debt issues

The popularity of convertible debt as a financing vehicle waxes and wanes. In this article, we investigate whether the timing of convertible debt issu es can be explained by three reported reasons for its use as a financing ve hicle. Specifically, we reexamine the long-standing beliefs that convertibl es are wed as "debt sweeteners" and there are "hot issue" markets for these securities. In addition, we examine whether convertibles help diminish the agency conflict between bondholders and stockholders as suggested by Brenn an and Schwartz (1988). Our empirical results suggest that. (1) corporate m anagers issue convertible debt as debt sweeteners and (2) more convertible debt is issued in hot markets. (C) 1999 Elsevier Science Inc. All rights re served.