Warrants in Initial Public Offerings: Empirical Evidence

Janice C Y How and John S Howe

The Journal of Business, 2001, vol. 74, issue 3, 433-57

Abstract: We investigate why firms include warrants in their initial public offerings (IPOs). We use a data set of Australian IPOs to examine two hypotheses about the inclusion of warrants in an IPO. The agency-cost hypothesis emphasizes the need for sequential financing for relatively young firms, because sequential financing reduces the opportunities for managers to squander money on unprofitable projects. The signaling hypothesis focuses on the choice of securities as a signaling mechanism in a market characterized by information asymmetry. The evidence favors the signaling hypothesis, thus contributing to our understanding of the types of securities issued by firms. Copyright 2001 by University of Chicago Press.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://dx.doi.org/10.1086/321933 full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:74:y:2001:i:3:p:433-57

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().