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Preferred Stock – Debt or Equity?

Telmen, Can LU and Mohall, Daniel (2018) NEKN01 20181
Department of Economics
Abstract
There has been previous research on the subject of preferred stock and its classification as debt or equity. This thesis adds to the discussion by incorporating a comprehensive measure for financial standing. In this thesis, preferred stock returns of 74 companies are regressed on the returns of bond and common equity and a measure of default probability. The result of the study is that the majority of preferred stock in the sample is debt-like, albeit with significant equity components. There is also a clear tendency of preferred stock issued by companies with poor financial standing to be equity-like and vice versa. From these results it is concluded that there is room to criticize the current classification of preferred stock as equity.
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author
Telmen, Can LU and Mohall, Daniel
supervisor
organization
alternative title
A study on the characteristics of preferred stock and the effects of default risk
course
NEKN01 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Preferred stock, Debt, Equity, Distance to default, Hybrid Assets
language
English
id
8946419
date added to LUP
2018-07-03 14:21:21
date last changed
2018-07-03 14:21:21
@misc{8946419,
  abstract     = {There has been previous research on the subject of preferred stock and its classification as debt or equity. This thesis adds to the discussion by incorporating a comprehensive measure for financial standing. In this thesis, preferred stock returns of 74 companies are regressed on the returns of bond and common equity and a measure of default probability. The result of the study is that the majority of preferred stock in the sample is debt-like, albeit with significant equity components. There is also a clear tendency of preferred stock issued by companies with poor financial standing to be equity-like and vice versa. From these results it is concluded that there is room to criticize the current classification of preferred stock as equity.},
  author       = {Telmen, Can and Mohall, Daniel},
  keyword      = {Preferred stock,Debt,Equity,Distance to default,Hybrid Assets},
  language     = {eng},
  note         = {Student Paper},
  title        = {Preferred Stock – Debt or Equity?},
  year         = {2018},
}