Why do Australian firms issue standalone warrants?

Balachandran, Balasingham and Kanapathipillai, Sutharson and Krishnamurti, Chandrasekhar and Theobald, Michael and Velayutham, Eswaran (2009) Why do Australian firms issue standalone warrants? In: Inaugural Finance and Corporate Governance Conference (FCGC 2010), 7-9 Apr 2010, Melbourne, Australia.

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This paper examines why Australian firms issue standalone warrants and how the market perceives this type of capital raising method. We find that firms with smaller size, smaller issue proceeds, higher risk and lower ownership concentration choose standalone warrants rather than rights issues of equity to raise equity capital. Price reactions to standalone warrant announcements are significantly and positively related to takeup and underwriting status consistent with the findings of Balachandran, Faff and Theobald (JFE, 2008) for the announcements of rights issues of equity.
Price reactions are stronger for moderately out-of-the-money warrants than in-the-money and deeply out-of-the-money warrants. We also find that managers of larger/moderate/smaller firms with higher/moderate/lower pre-event RUNUP and lower/moderate/higher risk choose in-themoney/moderately-out-of-the-money/deeply out-of-the money warrants.

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Item Type: Conference or Workshop Item (Commonwealth Reporting Category E) (Paper)
Refereed: No
Item Status: Live Archive
Additional Information: Copyright 2009 La Trobe University.
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 19 Nov 2014 23:51
Last Modified: 20 Nov 2014 00:02
Uncontrolled Keywords: rights issue of equity; rights issue of warrants; takeup; underwriting; ownership concentration
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management
18 Law and Legal Studies > 1801 Law > 180112 Equity and Trusts Law
Socio-Economic Objective: B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900101 Finance Services
URI: http://eprints.usq.edu.au/id/eprint/19810

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