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Equity Valuation Effects of Warrant-Debt Financing

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  • Phelps, Katherine L
  • Moore, William T
  • Roenfeldt, Rodney L
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    Abstract

    Stock 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 Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 14 (1991)
    Issue (Month): 2 (Summer)
    Pages: 93-103

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    Handle: RePEc:bla:jfnres:v:14:y:1991:i:2:p:93-103

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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    Web page: http://www.southwesternfinance.org/
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    Cited by:
    1. 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.
    2. 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.
    3. 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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