Work

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

Year: 2017

Type: article

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. Further, we document that the market reacts more favorably to standalone warrants issues than units and equity during the rights offering period.

Source: Australian Journal of Management

DOI: 10.1177/0312896216682062

Authors: Balasingham Balachandran, Sutharson Kanapathippillai, Chandrasekhar Krishnamurti, Michael Theobald, Eswaran Velayutham

Institutions: La Trobe University, Deakin University, University of South Australia, University of Southern Queensland, University of Birmingham

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funders: Deakin University, Universiteit van Amsterdam, Australian Research Council

Award: G4358416670