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EQUITY VALUATION EFFECTS OF WARRANT‐DEBT FINANCING
Author(s) -
Phelps Katherine L.,
Moore William T.,
Roenfeldt Rodney L.
Publication year - 1991
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1991.tb00648.x
Subject(s) - warrant , valuation effects , convertible bond , issuer , debt , valuation (finance) , equity (law) , capitalization , business , stock price , stock (firearms) , economics , finance , monetary economics , financial system , mechanical engineering , paleontology , linguistics , philosophy , series (stratigraphy) , political science , law , biology , engineering
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.