CAPITAL MARKET INSTRUMENTS: A STUDY ON EQUITY, DEBT AND HYBRID INSTRUMENTS

This study addresses the characteristics of the capital market instrument, factors, and accounting classification. The research examines the properties of equity, debt, and hybrid instruments, and their costs, from 1998 to 2026. The study revealed that companies use the accounting flexibility of IAS 32 to classify subordinated hybrid debt as equity to mislead the users of financial reports. The study finds that option pricing models suggest higher cost than straight debt for hybrids. However, despite the attacks on the credibility by credit rating agencies and the deep analytic research, hybrid instruments are viewed by most investors as risky equity resulting in lower prices and higher forecast errors.