Announcement effects of convertible bond loans versus warrant-bond loans: An empirical analysis for the Dutch market

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4. Summary and conclusions

The outcomes of this study indicate some interesting topics for future research. The first finding of
this study is that the announcement of an issue of CBs or WBs is positively perceived by the
market. The cumulative average abnormal return for an issue of CBs is 0.53% and even 1.61% for
WBs. This contrasts to outcomes of studies for the United States, where announcements of CBs
and WBs are more negatively perceived. The reason for this is that in the Netherlands, companies
"package" these announcements in other (good) firm specific news. It would be interesting to
investigate these effects for other capital markets.

The second finding in this study is that issues of WBs are more positively perceived by the
market than issues of CBs. A regression analysis, in which also other issue specific characteristics
are included, shows that shareholders receive WBs with a higher cumulative abnormal return of
1.68% in relation to CBs. The regression results also show that other issue specific characteristics,
such as the ratio of new equity to existing equity and the ratio of new equity to new debt are not
significant. However, the structural differences between CBs and WBs are not very large in the
Netherlands, contrary to e.g. the United States. For example, the ratio of new equity to new debt is
generally 100% for both US and Dutch CBs, but it is only 65% for WBs issued in the United
States, while it is 94% for WBs issued in the Netherlands. Therefore it may also more interesting
to run such a regression analysis for samples of CBs and WBs issued in the United States.

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