Debt and Equity Characteristics of Mandatorily Redeemable Preferred Stock

Debt and Equity Characteristics of Mandatorily Redeemable Preferred Stock Abstract. This study examines whether mandatorily redeemable preferred stock (MRPS) is priced more like debt or equity by (1) investigating its debt and equity characteristics and (2) specifying conditions under which one characteristic would dominate the other. Based on a sample of 113 nonconvertible MRPS issued during 1970 to 1990, our results are consistent with the view that MRPS has both debt and equity characteristics. The debt (equity) feature is more pronounced among nonutility (utility) issues. Within the utility group, we find high (low) rated MRPS issues to be more debt (equity) like. Our results appear to support current MRPS disclosure rules. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Debt and Equity Characteristics of Mandatorily Redeemable Preferred Stock

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1997 by 1997 Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008240603745
Publisher site
See Article on Publisher Site

Abstract

Abstract. This study examines whether mandatorily redeemable preferred stock (MRPS) is priced more like debt or equity by (1) investigating its debt and equity characteristics and (2) specifying conditions under which one characteristic would dominate the other. Based on a sample of 113 nonconvertible MRPS issued during 1970 to 1990, our results are consistent with the view that MRPS has both debt and equity characteristics. The debt (equity) feature is more pronounced among nonutility (utility) issues. Within the utility group, we find high (low) rated MRPS issues to be more debt (equity) like. Our results appear to support current MRPS disclosure rules.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 29, 2004

References

  • Measuring Corporate Bond Mortality and Performance
    Altman, E.I.

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