Corporate Call Policy for Nonconvertible Bonds

Abstract

We examine corporate call policy for 1,642 nonconvertible bonds that were called during the period 1975-94. The vast majority of firms delay calls and call when the bond price exceeds the call price. We find that larger, less liquidity constrained firms with a larger opportunity cost of delaying a call have shorter call delays. There is no evidence that refunding transaction costs, wealth redistribution effects, call notice periods, or a desire to eliminate restrictive covenants influence the timing of calls. An examination of call motives suggests that there is no one underlying motive that fits the average call.

JEL Classification: G31, G32