The popular financial press often suggests that convertible debt issued by European firms is more debt-like in nature than convertible debt issued by US firms. This paper is the first to formally test the validity of this common perception. Our evidence indicates that European convertibles are effectively structured to be more debt-like than US convertibles. We also show that European convertible debt announcements induce less negative stockholder reactions than US announcements, which is consistent with the larger debt component of the former securities. Lastly, we explore some potential explanations for the relatively more debt-like design of European convertibles. Our results indicate that this finding may be attributable to both issuer-related and institutional differences across European and US convertible debt markets.
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