2024- Working Papers: Finance, Accounting and Insurance
Product Market Competition and Convertible Debt Financing, 47 pp.
C. Lei, E. Lyandres, C. Veld and Y. Xia
(Working Paper No. 4/2024)
Research No: 05323100
We study the relation between product market competition and convertible debt financing. Competitive threats motivate firms to use convertible debt because the possibility of future conversion enhances financial flexibility. Consistent with this intuition, we find that the intensity of competitive threats is positively associated with convertible debt usage, at both the extensive and intensive margins. We further confirm our findings by using large tariff reductions as an exogenous shock to competition. When competitive threats rise, convertible debt issuers increase the probability of future conversion by including shorter call protection periods and tailoring a higher conversion sensitivity to stock performance.
Does Market Efficiency Impact Capital Allocation Efficiency? The Case of Decentralized Exchanges, 49 pp.
E. Lyandres and A. Zaidelson
(Working Paper No. 5/2024)
Research No: 05324100
We examine the effect of market efficiency on the efficiency of capital allocation in the setting of decentralized exchanges of crypto assets. Utilizing data on nearly 100 million trades in concentrated liquidity pools on two leading blockchains, we construct a highly granular, capitalmarket-based measure of capital allocation efficiency. We also design and implement a method of identifying market-efficiency-restoring arbitrage transactions among all blockchain transactions and construct arbitrage-based granular measures of market efficiency. We find that market efficiency has positive, economically and statistically significant, and causal impact on capital allocation efficiency.
