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Warrants in the financial management decisions of innovative firms

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  • Hyuna Park

Abstract

Intangible investments such as R&D are expensed rather than capitalized due to accounting conservatism. Thus, firms with mostly intangible assets are subject to more constraints in external financing than others and need alternatives. I find that they increasingly use equity warrants as a solution by developing a novel data set from textual analysis. Out of 181,425 annual reports submitted to the US Securities and Exchange Commission during 1994–2018, 10,300 discuss the fair value of warrants. The proportion of warrant firms increased from 0.4% in 1994% to 8% in 2018. Logistic regressions confirm that intangible investments and financial constraints explain warrants.

Suggested Citation

  • Hyuna Park, 2022. "Warrants in the financial management decisions of innovative firms," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(2), pages 276-295, February.
    • Handle: RePEc:wly:jfutmk:v:42:y:2022:i:2:p:276-295
    DOI: 10.1002/fut.22266
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