Date of Award


Document Type

Open Access Dissertation


Moore School of Business


Business Administration

First Advisor

Donghang Zhang

Second Advisor

Jean Helwege


This dissertation presents empirical analysis of the capital structure, security issuance, value creation, and valuation concepts of corporate finance. Two analysis examine connections between firm capital structure and the use of convertible debt securities, which have mixed debt and equity attributes. The third analysis examines the valuation of implicit and explicit signals of firm quality.

Chapter 1, Convertible Debt & Target Leverage Adjustments, examines how does convertible debt affects advances toward target capital structure. Convertibles may improve leverage adjustments by providing capital that is less costly to issue and less expensive to service. However, convertibles can be risky liabilities with uncertainty around the achievement and timing of conversion events. I find that issuers - both above and below respective target ratios - experience faster leverage adjustments during the issuance window and throughout the active outstanding offer period. Issuers realize faster adjustments by exercising call options and redemption exchanges. Robust to concurrent capital structure changes, the results suggest convertible debt can be an effective tool for target leverage adjustments.

Chapter 2, Target Leverage Deviations & Convertible Debt Design, examines whether the terms and provisions of convertible bond offers are distinctly related to the issuers’ ex-ante target capital structure needs? Accounting for market-wide equity volatility and cumulative returns, aggregate investor demand, macroeconomic conditions and firm-specific equity and growth characteristics, I find that drifts (deviations) from target capital structure have a positive and significant effect on convertible bond issuance. Yet, the magnitude and direction of target deviations have varying effects on the sensitivity of conversion terms, principal offer amounts, and the inclusion of call, put, and redemption provisions.

Chapter 3, Does the Market Value Innovative Ability? Evidence from M&A, co-authored with Adam Usman and Jamie Weathers, analyzes M&A announcement return effects when the acquirer displays a superior capability to convert investments in innovation into tangible valued output. We find a positive relation between acquirer innovation conversion (IC) ability and abnormal returns around M&A announcements. Further, we use distinct measures of IC ability to compare internal and external innovation investments. We find larger returns for the external measure (Intangible Assets) relative to the internal measure (R&D), which is the typical proxy for innovation investments. The results suggest IC ability type matters; market perception of the value impact of an acquisition differ across the acquirers’ capability to capitalize external innovation.