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The choice between non-callable and callable bonds

journal contribution
posted on 2023-06-08, 18:05 authored by Laurence Booth, Dimitrios Gounopoulos, Frank Skinner
We examine the choice and the offer spreads between callable and non-callable bonds. We find significant differences by industry sector so our results are segmented by financial and non-financial industries. For the financial sector, the popularity of callable and non-callable bonds is significantly related to the economic environment. Financial and high grade non-financial callable bonds are also more likely to be issued via a shelf prospectus. While firms that issue callable bonds do not consistently display the characteristics associated with severe agency problems, the issue choice for below investment grade non-financial and lower rated financial bonds, where we can expect agency problems to be more severe, is more consistent with agency theory than the issue choice for higher rated bonds.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Journal Of Financial Research

ISSN

0270-2592

Publisher

Wiley

Volume

37

Page range

435-460

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2014-08-12

First Compliant Deposit (FCD) Date

2014-08-12

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