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Lee Hwei Khaw

Doctor of Philosophy, (Finance)
Study Completed: 2013
Massey Business School


Thesis Title
Convertible bonds from the investment and financing perspectives

Read article at Massey Research Online: MRO icon

Ms Khaw examined the hybrid features (particularly the equity options) of convertible bonds from both investment and financing perspectives. Convertible bonds are an important segment of the security market, but scholars have not given these securities extensive attention as compared to bonds and equities. Ms Khaw’s thesis provides valuable insights into the degree of mispricing of convertible bonds, using a unique sample of pure US convertible bonds that controls for the complex optionality present in these securities. She found that the stochastic nature of volatility has a significant impact on the pricing of convertible bonds, while liquidity is also an important explanatory variable. Alternately, from the financing perspective, Ms Khaw’s thesis highlights the importance of recognising the equity option that is present in the debt component of multinational corporations (MNCs). Results show that MNCs mitigate the agency costs of debt that arise from international financing by issuing convertible bonds.

Professor Martin Young
Professor Jonathan Batten