Wealth Effects of Convertible Bond and Warrant-Bond Offerings: A Meta Analysis

The European Journal of Finance, Forthcoming

31 Pages Posted: 12 Oct 2010 Last revised: 3 Aug 2012

See all articles by Norhuda Abdul Rahim

Norhuda Abdul Rahim

University Putra Malaysia - Department of Accouting and Finance

Alan Goodacre

University of Stirling - Department of Accounting and Finance

Chris Veld

Monash University

Date Written: August 2, 2012

Abstract

We review the literature on wealth effects associated with the announcements of convertible bond and warrant-bond offerings. The findings of 35 event studies, which include 84 sub-samples and 6,310 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 United States 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.

Suggested Citation

Abdul Rahim, Norhuda and Goodacre, Alan and Veld, Chris, Wealth Effects of Convertible Bond and Warrant-Bond Offerings: A Meta Analysis (August 2, 2012). The European Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1687098 or http://dx.doi.org/10.2139/ssrn.1687098

Norhuda Abdul Rahim

University Putra Malaysia - Department of Accouting and Finance ( email )

Serdang, Selangor 43400
Malaysia

Alan Goodacre

University of Stirling - Department of Accounting and Finance ( email )

Stirling, FK9 4LA
United Kingdom
+44 1786 467291 (Phone)
+44 1786 467308 (Fax)

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

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