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The liquidity hypothesis predicts negative abnormal returns around the conversion-forcing call announcements of convertible bonds, followed by a price recovery. We find the former but not the latter. The liquidity hypothesis also implies that the abnormal returns during the announcement and the post-announcement periods should be related to proxies for the stock s liquidity. Again, our findings do not support these implications of the liquidity hypothesis. We conclude that the reason for the negative abnormal returns around the announcement of a conversion-forcing call needs further examination.