Issuance of Warrants in Seasoned Equity Offerings - Evidence from Rights Offerings

The Australian financial market is unique in enabling firms to raise new capital via right offerings of standalone warrants in seasoned equity offerings. As such, it provides an ideal environment for examining the validity of the Chemmanur and Fulghieri's (1997) signaling model for warrant inclusion in seasoned equity offerings via rights offerings by analyzing across unit offerings, standalone warrants and standalone equity. We provide empirical evidence in support of their model's predictions regarding\udthe issuance of warrants to existing shareholders. The quality dimension contained in the signals is associated with a more favorable stock price reaction, ceteris paribus