Catering for security types: the case of warrants

John S. Howe and Biljana Nikolic

Review of Behavioral Finance, 2012, vol. 4, issue 1, 28-45

Abstract: Purpose - The purpose of this paper is to assess whether the decision to issue warrants in an initial public offering (IPO) is subject to catering influences. Design/methodology/approach - The approach used was to measure the market “warrant premium” and assess whether it relates to the probability of firms including warrants in their IPOs. Findings - The evidence is strongly supportive of a catering influence on the firm's decision to include warrants in its IPO. Practical implications - Sentiment is a factor in the selection of what securities a firm sells at its IPO. The findings lend further credence to the pervasiveness of catering. Originality/value - No prior study has examined the role that catering plays in the selection of types of securities to sell.

Keywords: Catering; Sentiment; Warrants; Initial public offering; IPO; Securities (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:v:4:y:2012:i:1:p:28-45

DOI: 10.1108/19405971211261092

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