Discretionary reductions in warrant exercise prices

• 成果类型: Article
• 署名作者: Howe, JS; Su, T
• 署名单位: University of Missouri System; University of Missouri Columbia; University of Miami
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(01)00061-7
• 发表日期: 2001
• 页码: 227-252
• 关键词: warrants; Equity financing; exercise price; managerial flexibility; security design

摘要

Managers can decide to reduce a warrant's exercise price. A reduction in exercise price can induce exercise (a conversion-forcing reduction) or not (a long-term reduction). Conversion-Forcing firms show an abnormal return of -1.53% on the announcement day but they perform well over the three: years following the announcement. This finding suggests that the funds raised from warrant exercise are invested in profitable projects, Long-term reductions show an abnormal return of -1.15% on the announcement day. These firms also perform well following the reduction. which suggests that the lower exercise price restores managerial incentives. (C) 2001 Elsevier Science S.A. All rights reserved.