The Use of Warrants in Mergers and Acquisitions

Etienne Redor

A chapter in International Corporate Governance, 2011, pp 65-86 from Emerald Group Publishing Limited

Abstract: In a world of asymmetric information between managers and investors, the choice of the payment method is a key issue in mergers and acquisitions. Previous literature shows that contingent methods of payment other than stocks (e.g. contingent value rights, earnouts or convertible securities), even if they do not solve the information asymmetry problems, can mitigate their consequences. In this chapter, I examine the motivations and the effects of the inclusion of a contingent payment method the use of which has not been studied yet, the warrant. I show that this consideration is used mainly when information asymmetry problems are severe and that it can be used to solve the information problems.

Keywords: Warrant; merger and acquisition; payment method; information asymmetry; contingent payment; shareholders’ wealth (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afeczz:s1569-3732(2011)0000014006

DOI: 10.1108/S1569-3732(2011)0000014006

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