Preferred Stock – Debt or Equity?
(2018) NEKN01 20181Department 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.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8946419
- 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
- 2018
- 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}}, language = {{eng}}, note = {{Student Paper}}, title = {{Preferred Stock – Debt or Equity?}}, year = {{2018}}, }