Call Timing of Callable Non-Convertible Bonds: A Survival Analysis

Jung Bum Wee, Keunkwan Ryu, Ki Beom Binh


We empirically analyze the factors affecting corporate decisions to call non-convertible bonds using survival analysis. The results show that firms tend to defer calling non-convertible bonds in order to mitigate agency costs of debt (including under-investment and risk-shift); that calling is significantly more intense if positive information is revealed; that non-refundability clauses are binding on call decisions; that firms are more likely to redeem bonds to refund if market interest rates fall dramatically; and that this interest effect is stronger as the transaction costs of refunding decrease. Also, this paper shows that call intensity monotonically decreases after call protection periods expire.


Call hazard rate, callable non-convertible bond, embedded call option, percentage life, duration.

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ISSN: 1929-7092