Announcement effects of convertible bond loans and warrant-bond loans: An empirical analysis for the Dutch market

This study investigates the announcement effects of offerings of convertible bond loans and warrant-bond loans using data for the Dutch market. The event study analysis shows that announcement effects of convertible bunds are associated with positive but insignificant abnormal returns and that announcements of warrant-bonds are associated with significant positive abnormal returns. These findings are similar to the results for Japanese hybrid debt, as reported by Kang et al. (1995) (Kang, J.K., Kim, Y.C., Park, K.J., Stulz, R.M., 1995. Journal of Financial and Quantitative Analysis, pp. 257-270) and Kang and Stulz (1996) (Kang, J.K., Stulz, R.M., 1996. Review of Financial Studies, pp. 109-139), but they contrast with studies for the United States that generally find significant negative abnormal returns for convertible bond loans and insignificant negative abnormal returns for warrant-bond loans. Our results cannot be attributed to differences in the corporate governance structures of the Netherlands and the United States. We find that the positive abnormal returns for the warrant-bond loans are caused by the packaging of the announcements with other (good) firm-specific news. (C) 1998 Elsevier Science B.V. All rights reserved.