Why firms issue convertible debt has both intrigued and puzzled financial researchers. The convertible bonds are after all only a bundle of straight debt and call options on the issuer company’s stock. What special advantages do they provide that cannot be mimicked by a unit offering of straight bond debt and warrants? Yet the popularity of convertibles remains unabated and continues to challenge researchers to come up with reasonable explanations. A rich theoretical literature has also developed to explain rationales for convertible issuance but empirical evidence is mixed. The goal of this paper is to provide some insights into the link between theory and practice of convertible issuance through a survey of European managers.

Our survey complements and extends the literature in several aspects. First, most of the previous managerial surveys on convertible debt issuance have been undertaken in the U.S. which has a well-developed and mature convertible market. In contrast, the European convertible market gained momentum only in the mid-1990s but has grown rapidly since then. Further, European convertible bonds have several distinctive features not observed in the U.S. case. For example, in addition to issuing the standard convertible debt security, many European firms also issue exchangeable bonds where the options are written on securities of other firms. Also, many European convertibles are denominated in a currency other than that of the underlying equity. Further, convertible features, markets, and regulatory environments vary widely even across European countries providing us a rich data set to explore cross-country differences. The French market comprises about one third of the European market and is the fastest growing with a large base of private and institutional investors. In this study, we compare managerial perspectives of French versus other European firms to gain some insights into factors that may have spurred growth of the French convertible market.