Profs Beaumont, Schumacher and Weitzner awarded SSHRC Insight Development Grant

Congratulations to Paul Beaumont, David Schumacher and Gregory Weitzner, who were awarded a 2022-2023 SSHRC Insight Development Grant

“Call Me Maybe: Institutional Ownership and Corporate Call Policy”

Callable bonds, a prevalent category of debt securities, account for approximately 90% of outstanding corporate bonds. These financial instruments grant the issuer the right to repay the bond at a predetermined call price before its maturity date. In theory, firms should exercise their call option once the bond price reaches the call price; however, empirical evidence reveals that 28% of bonds are called with an average delay of one year. This study seeks to examine why that is the case. An overlooked aspect of refinancing through callable bonds is that calling a bond hurts existing bondholders. As a result, bond calls could erode bondholders' loyalty, making it more difficult to issue new bonds. Our findings indicate that, following a call, firms lose valuable bondholders. Furthermore, firms with more valuable bondholders demonstrate a higher propensity to delay calls, presumably to retain these bondholders.

Paul Beaumont, Assistant Professor of Finance, is principal investigator with both David Schumacher, Associate Professor of Finance, and Professor Gregory Weitzner, Assistant Professor of Finance, as co-investigators on this grant.

Supported in part by funding from the Social Sciences and Humanities Research Council.

En partie financé par le Conseil de recherches en sciences humaines.