Industry Effects and Convertible Bond Sequence

In this paper, we study how the announcement returns of convertible bonds change for different issues in a sequence for firms in various sectors of the economy. We show that industrial firms obtain significantly lower returns in later issues of convertible bonds compared to former issues. In fact, the announcement returns for the first issue of these firms in our sample period is insignificant while the returns for later issues are significantly negative. We obtain the same result for industrial firms even after we control for other variables that affect announcement returns of convertible bonds. Our results show that the announcement returns for financial firms and utilities do not present this pattern. The returns for these firms are similar for different convertible bond issues in a sequence