No abstract

No abstract

This article presents a contingent claim valuation of a callable convertible bond with the issuer's credit risk. The optimal call, voluntary conversion, and bankruptcy strategies are jointly determined by shareholders and bondholders to maximize the equity value and the bond value, respectively. This model not only incorporates tax benefits, bankruptcy costs, refunding costs, and a call notice period, but also takes account of the issuer's debt size and structure. The numerical results show that the predicted optimal call policies are generally consistent with recent empirical findings; therefore, calling convertible bonds too late or too early can be rational. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:895-922, 2006 The authors are grateful to an anonymous reviewer for his/her valuable comments and suggestions.

No abstract

This paper theoretically and empirically investigates the relationship between the intensity of product market competition and the fraction of firms that use stock-based compensation in an industry. By employing the relationship between a firm's risk-taking behavior and the use of stock-based compensation, we theoretically show that when the fraction of firms using stock-based compensation is less (more) than one-half, there is a positive (negative) relationship between the fraction and the intensity of product market competition and further provide some supportive empirical evidence. Our results imply that there is more heterogeneity in firms' stock-based compensation policies in the more competitive industry.