Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 1, 2016 erstellt
Description:
Our study examines firms’ motivation to issue hybrid bonds. Hybrid bonds have been issued in more than 15 different countries around the world and have been the most relevant class of hybrid securities in these countries since 2005. A hybrid bond offers several structuring opportunities. Depending on how the hybrid bond is structured, it can be classified as equity or debt (i) for tax purposes, (ii) by rating agencies, and/or (iii) under International Financial Reporting Standards (IFRS). Our findings suggest that firms exploit this structuring opportunity. Rated firms issue hybrid bonds that have equity content for rating purposes and thus strengthen the firm’s credit rating, but 55% of hybrid bonds are treated as debt under IFRS. Rated firms choose to issue hybrid bonds when their incentive to manage credit ratings increases. In contrast, unrated firms issue only hybrid bonds that are classified as equity under IFRS and thus decrease IFRS leverage. Taken together, our findings show that rated firms manage their credit rating, and unrated firms manage their IFRS leverage. Both rated and unrated firms are willing to incur considerable additional costs, suggesting that firms perceive substantial benefits from managing credit ratings and IFRS leverage