Equity Valuation Effects of Warrant-Debt Financing
AbstractStock price reactions to warrant-debt unit financing announcements are examined and a significant two-day average abnormal return of -1.32 percent is found. The negative average abnormal return is similar to that observed for convertible debt financing announcements in previous research. Warrant-debt financing decisions result in large increases in capitalization; on average, issuers' long-term debt increases by 84 percent, and common shares outstanding increase by 18 percent assuming full exercise of the warrants.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 14 (1991)
Issue (Month): 2 (Summer)
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- Suchard, Jo-Ann, 2005. "The use of stand alone warrants as unique capital raising instruments," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1095-1112, May.
- Noguchi, Akihiro, 1998. "Effect of the inconsistency in accounting standards on the choice of financial instruments: The case of debt issued with stock purchase warrants and convertible debt by Japanese companies," The International Journal of Accounting, Elsevier, vol. 33(3), pages 335-345.
- Doukas, John A. & Pantzalis, Christos, 2003. "Geographic diversification and agency costs of debt of multinational firms," Journal of Corporate Finance, Elsevier, vol. 9(1), pages 59-92, January.
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