Effects of law on corporate financing practices-international evidence from convertible bond issues

Finns can adjust their convertibles to be more debt-like or equity-like through several contract terms. in particular, by providing call protection, a convertible issuer can assure its convertible bondholders that it will not force them to become equity holders during the call protection period. The possibility of a forced conversion instituted by an early call should be more threatening to investors in an economy where local laws are biased against shareholders. I examine call protection terms in an international sample and find evidence consistent with the hypothesis that convertible bond design varies based on the features of local law. (c) 2005 Elsevier B.V All rights reserved.