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The Performance and Pricing of Dividend Rate-Reset Preferred Shares in Canada

Title:

The Performance and Pricing of Dividend Rate-Reset Preferred Shares in Canada

Matuluko, Oluwafunmilayo (2021) The Performance and Pricing of Dividend Rate-Reset Preferred Shares in Canada. Masters thesis, Concordia University.

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Abstract

This study provides novel evidence of dividend rate-reset preferred shares issued in Canada from January 2010 – December 2019 by financial and industrial firms. Using an event study approach, we examine how the issuance of dividend rate-reset preferred shares affect common stock returns of companies that issue them. We also value the embedded Bermudan call option in the dividend rate-reset preferred shares through a binomial tree model. Furthermore, this study tests how efficient these prices obtained from the binomial tree model are when compared with the actual prices. We discovered from our analyses that dividend rate-reset preferred shares do not negatively impact common stock returns as new equity issues often do. We also find that the prices are not efficient based on the Bermuda call option binomial model. This implies that the theoretical model underpriced the actual prices and that these preferred shares are overpriced relative to the theoretical model.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Matuluko, Oluwafunmilayo
Institution:Concordia University
Degree Name:M. Sc.
Program:Finance
Date:13 September 2021
Thesis Supervisor(s):Switzer, Lorne
Keywords:dividend rate-reset preferred shares, event study, binomial tree model, Bermudan call option
ID Code:989047
Deposited By: OLUWAFUNMILAYO MATULUKO
Deposited On:29 Nov 2021 17:03
Last Modified:29 Nov 2021 17:03

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