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Announcement effects of convertible bond loans versus warrant-bond loans: An empirical analysis for the Dutch market

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Author Info

  • Roon, F.A. de
  • Veld, C.H.

    (Tilburg University, Center for Economic Research)

Abstract

This study investigates the announcement effects of offerings of convertible bond loans and warrant-bond loans using data for the Dutch market. Using standard event study methodology it is found that on average stock prices show a positive but insignificant abnormal return for the announcement of a convertible bond loan and a significant positive abnormal return for the announcement of a warrant-bond loan. These findings contrast with studies for the United States which generally find significant negative abnormal returns for convertible bond loans and negative but no significant abnormal returns for warrant-bond loans. This can be explained by the fact that Dutch companies generally package these announcements with other (good) firm specific news. Using regression analysis, in which the amount of new equity and new debt involved in the issue are taken into account, it is found that shareholders react more positively to the announcement of warrant-bond loans than to the announcement of convertible bond loans.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1995-9.

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Date of creation: 1995
Date of revision:
Handle: RePEc:dgr:kubcen:19959

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Web page: http://center.uvt.nl

Related research

Keywords: Bond Markets; Convertible Bonds; finance;

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Cited by:
  1. Abhyankar, Abhay & Dunning, Alison, 1999. "Wealth effects of convertible bond and convertible preference share issues: An empirical analysis of the UK market," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 1043-1065, July.
  2. Sophie Manigart & Koen De Waele, 1999. "Choice dividends and contemporaneous earnings announcements on a small stock market: an empirical study," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 161, pages 27-56.
  3. Matthias C. Grüninger & Claudia B. Wöhle, 2005. "Warum begeben Unternehmen Wandelanleihen?," Working papers 2005/02, Faculty of Business and Economics - University of Basel.
  4. Wolfgang Drobetz & Matthias C. Grüninger & Claudia B. Wöhle, 2006. "Warum begeben Unternehmen Wandelanleihen?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(III), pages 331-365, September.

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