ANNOUNCEMENT EFFECTS OF CONVERTIBLE BOND LOANS VERSUS WARRANT-
BOND LOANS: AN EMPIRICAL ANALYSIS FOR THE DUTCH MARKET
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 amount of new equity and new debt involved in the 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.
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