The issuance of warrants in rights offerings: agency costs and signaling effects

Balachandran, Balasingham and Kanapathippillai, Sutharson and Krishnamurti, Chandrasekhar and Theobald, Michael and Velayutham, Eswaran (2017) The issuance of warrants in rights offerings: agency costs and signaling effects. Australian Journal of Management, 42 (4). pp. 608-636.


Abstract

We examine the issuance choice across rights issues of equity, unit offerings, and standalone warrants and investigate the market reactions to these issue types. We find that agency costs, growth opportunities, and current funding needs relative to assets in place are prime drivers of the type of equity issuance choice. Managers use quality signals such as underpricing, underwriting status, and the proportion of funds raised by exercising warrants in determining the features of the warrant issue. Furthermore, we document that the market reacts more favorably to standalone warrants issues than units and equity during the rights offering period.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Files associated with this item cannot be displayed due to copyright restrictions.
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Commerce (1 July 2013 -)
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Commerce (1 July 2013 -)
Date Deposited: 20 Sep 2019 00:46
Last Modified: 25 Sep 2019 04:17
Uncontrolled Keywords: agency cost, Australia, equity, issuance choice, rights offerings, signaling, unit offerings, warrants
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Identification Number or DOI: 10.1177/0312896216682062
URI: http://eprints.usq.edu.au/id/eprint/36083

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