The Convertible Bond Announcement Effect - An Event Study on the Nordic Markets

Abstract: The announcement effect of convertible bonds is a well-researched topic. However, there is no clear consensus whether the announcements of convertible bond issuance affect the stock price positively or negatively. Previous research shows that this effect differs between markets. As no previous research has been examining the Nordic markets, we find this to be of interest. The aim of this thesis is to examine if there is an announcement effect of convertible bond issues on the Nordic markets. To find if there is an announcement effect, we conduct an event study on 53 observations to obtain abnormal returns for several different event windows. Furthermore, we examine if the firm-specific variables; size of the issuing firm, leverage, market-to-book and the relative issue size are significantly affecting the abnormal returns. Based on the findings of the abnormal returns we find a negative significant announcement effect. The result is also in line with what the majority of studies finds in other European markets. Furthermore, we find leverage to have a positive effect and the relative issue size to have a negative effect on the abnormal returns.