Shareholder gains from callable‐bond refundings | Zendy

Emery Douglas R. | Zendy; Lewellen Wilbur G. | Zendy

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Shareholder gains from callable‐bond refundings

Author(s) -

Emery Douglas R.,

Lewellen Wilbur G.

Publication year - 1990

Publication title -

managerial and decision economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.288

H-Index - 51

eISSN - 1099-1468

pISSN - 0143-6570

DOI - 10.1002/mde.4090110108

Subject(s) - callable bond , bond , shareholder , obligation , debt , maturity (psychological) , business , actuarial science , economics , value (mathematics) , monetary economics , finance , mathematics , statistics , corporate governance , political science , law , psychology , developmental psychology

A re‐examination indicates that current procedures for measuring the benefit realized by shareholders when a firm calls and refunds an outstanding debt obligation are mis‐specified. The key to a proper measurement is found to lie in the identification of the extinguished remaining‐time‐to‐maturity value of the exercised option on the called debt. A simple procedure for assessing that value is provided and incorporated into a corrected measure of the gains from a callable‐bond refunding.

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