Seminar by Dr Bala Balachandran
- Topic: Standalone Warrants, Subscription Period, Shareholder Takeup and Moneyness of warrants
- Speaker: Dr Bala Balachandran, Associate Professor in Finance, La Trobe Business School
- Venue:E4A 623
- When: 17th May, 2013, (Fri)
- Time: 11.30am-12.30pm (Morning Tea from 11am)
We examine the market reaction to the announcement of standalone warrants during the announcement period and post announcement period until the end of subscription period. We find that the market reacts positively to the announcement of standalone warrants and further drifts during the post announcement period, indicating some evidence of inefficiencies in the adjustment process, consistent with the overconfidence framework developed in Daniel et al. (1998). This drift is positively related to the moneyness warrants and shareholders' takeup. We also find a positive relation between underpricing and risk and between risk and the proportion of funds raised at the issuance of warrants relative to the funds to be raised by exercising warrants consistent with the work of Chemmanur and Fulghieri (1997).