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Comment: Convertible Debt Financing

Published online by Cambridge University Press:  19 October 2009

Miles Livingston
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Extract

A student of financial theory must always assume that managers will follow a course of action that will lead to a higher value of the firm rather than a lower value, given a choice between two courses of action. Yet, Lewellen and Racette (hereafter LR) in a recent paper [1] comparing the sale of convertible debentures with the sale of straight debt assumed that managers will behave in a way that will lead to submaximal firm value. The purpose of this paper is to correct the LR error.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 12 , Issue 3 , September 1977 , pp. 515 - 518
Copyright
Copyright © School of Business Administration, University of Washington 1977

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References

REFERENCES

[1]Lewellen, W., and Racette, G.. “Convertible Debt Financing.” Journal of Financial and Quantitative Analysis, Vol. 8 (December 1973), pp. 777–792.CrossRefGoogle Scholar