Shares vs. Warrant-Share Units: Evidence from Seasoned Equity Offerings

Posted: 5 Apr 2003

See all articles by Soku Byoun

Soku Byoun

Baylor University

William T. Moore

University of South Carolina

Multiple version iconThere are 2 versions of this paper


We examine seasoned offerings of common stock and stock-warrant units to test predictions of recent theories of security issuance based on sequential financing and information signaling. We specify and test a simultaneous equations model involving the choice of shares versus stock-warrant units and announcement period abnormal return equations for shares and units. Consistent with theoretical predictions of the signaling hypothesis, we find that smaller issues made by young and risky firms are more likely to issue stock-warrant units in seasoned offerings. Also, consistent with the signaling hypothesis but not with the sequential financing hypothesis, firms with greater managerial ownership are more likely to issue units. We also find that firms that include warrants in their stock offerings experience a higher average abnormal return than if they had issued shares alone. We report further evidence consistent with the implications of the signaling hypothesis regarding underpricing, riskiness and insider ownership. Thus while sequential financing and signaling explanations find support in our tests, the signaling hypothesis arises as the more complete explanation for stock-warrant unit financing.

Keywords: Unit offering, signaling, agency cost, warrant

JEL Classification: G32

Suggested Citation

Byoun, Soku and Moore, William Ted, Shares vs. Warrant-Share Units: Evidence from Seasoned Equity Offerings. Forthcoming in Journal of Corporate Finance. Available at SSRN:

Soku Byoun (Contact Author)

Baylor University ( email )

Department of Finance Insurance & Real Estate
P.O.Box 98004
Waco, TX 76712
254-710-7849 (Phone)

William Ted Moore

University of South Carolina ( email )

Darla Moore School of Business The Francis M. Hipp
Columbia, SC 29208
United States
803-777-4905 (Phone)
803-777-6876 (Fax)

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