Announcement Effects of Convertible Bond Loans Versus Warrant-Bond Loans: An Empirical Analysis for the Dutch Market

Posted: 23 Jul 1999

See all articles by Frans de Roon

Frans de Roon

Tilburg University - Department of Finance

Chris Veld

Monash University

Date Written: December 1994

Abstract

This study investigates the announcement effects of offerings of convertible bond loans and warrant-bond loans using data for the Dutch market. Using standard event study methodology it is found that on average stock prices show a positive but insignificant abnormal return for the announcement of a convertible bond loan and a significant positive abnormal return for the announcement of a warrant- bond loan. These findings contrast with studies for the United States which generally find significant negative abnormal returns for convertible bond loans and negative but no significant abnormal returns for warrant-bond loans. This can be explained by the fact that Dutch companies generally package these announcements with other (good) firm specific news. Using regression analysis, in which the main characteristics of the underlying issue are taken into account, it is found that shareholders react more positively to the announcement of warrant-bond loans than to the announcement of convertible bond loans.

JEL Classification: G32

Suggested Citation

de Roon, Frans A. and Veld, Chris, Announcement Effects of Convertible Bond Loans Versus Warrant-Bond Loans: An Empirical Analysis for the Dutch Market (December 1994). Available at SSRN: https://ssrn.com/abstract=5938

Frans A. De Roon

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 1 3466 8361/3025 (Phone)
+31 1 3466 2875 (Fax)

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

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