FRIC/Finance Seminar with Dong Yan, Stockholm School of Economics

On Friday, March 11, Dong Yan, Stockholm School of Economics, will be giving a seminar on the paper: Credit Risk and the Life Cycle of Callable Bonds: Implications for Real Corporate Decisions

Friday, March 11, 2022 - 11:00 to 12:15

The Department of Finance and the Center for Financial Frictions (FRIC) is proud to announce the upcoming seminar with Dong Yan, Stockholm School of Economics. 

Dong Yan will present: Credit Risk and the Life Cycle of Callable Bon ds: Implications for Real Corporate Decisions

ABSTRACT:

We show that callable bonds have both higher yields and lower market prices than non-callable bonds of the same issuer, reflecting the value of call features to issuers and investors. This “cost of callability” and both the inclusion and the exercise of call rights are determined by levels and changes in issuer-specific credit quality. Our agency-based theoretical and empirical analyses further demonstrate that callability reduces debt overhang in corporate mergers and investment. Our results help explain the value and prevalence of callable bonds. They suggest that debt callability is a key capital structure parameter.

 

Location:
Solbjerg Plads 3
2000 Frederiksberg
Room: SP205

The page was last edited by: Department of Finance // 01/25/2024