Wealth effects of convertible-bond and warrant-bond offerings: a meta-analysis

Abdul Rahim, N., Goodacre, A. and Veld, C. (2014) Wealth effects of convertible-bond and warrant-bond offerings: a meta-analysis. European Journal of Finance, 20(4), pp. 380-398. (doi: 10.1080/1351847X.2012.712920)

Abstract

The literature on wealth effects associated with the announcements of convertible-bond and warrant-bond offerings is reviewed. The findings of 35 event studies, which include 84 sub-samples and 6310 announcements, are analysed using meta-analysis. We find a mean cumulative abnormal return of−1.14% for convertibles compared with−0.02% for warrant bonds, the significant difference confirming a relative advantage for warrant bonds. Abnormal returns for hybrid securities issued in the USA are significantly more negative than those issued in other countries. In addition, issuing hybrid securities to refund debt does not seem to be favoured by investors. Finally, several factors identified as important by theory or in prior research are not significant within our cross-study models, suggesting that more evidence is needed to confirm whether they are robust.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Veld, Professor Chris
• Authors: Abdul Rahim, N., Goodacre, A., and Veld, C.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: European Journal of Finance
• Publisher: Routledge
• ISSN: 1351-847X
• ISSN (Online): 1466-4364
• Published Online: 24 August 2012
• Copyright Holders: Copyright © 2012 Taylor and Francis
• First Published: First published in European Journal of Finance 20(4):380-398
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher