Callable or convertible debt? The role of debt overhang and covenants
研究了当企业需要大量举债时，债务积压和契约条款如何影响经理人选择发行可赎回债还是可转换债。发现可赎回债导致更大的债务积压摩擦，高杠杆企业更偏好可转换债；若已有债券附有净资产契约，则更可能发行可赎回债。实证结果支持理论。
We analyze what role debt overhang and covenants have in a manager’s choice between issuing callable or convertible debt when a firm needs to issue a substantial amount of debt. Callable bonds provide a higher coupon in exchange for a repurchase option. Convertible bonds offer bondholders the option to exchange debt to equity. Using a dynamic capital structure model with investment choice, we find that callable debt implies a larger debt overhang friction, and for highly leveraged firms convertible debt is preferred. Moreover, if outstanding bonds have net-worth covenants attached, callable bonds are more likely to be issued. Our empirical findings support the theory.