Matching Financial and Real Investment Options: Evidence from Warrant Calls
Posted: 13 Dec 2004
Abstract
We provide new evidence on the sequential financing explanation for the use of warrants. Consistent with sequential financing, capital spending starts increasing in the year of the call and peaks three years after the call. In addition, both equity and debt financing increase significantly in the year of the call and remain at high levels. Warrant contract features - the exercise price and the presence or absence of a price condition for callable warrants - are also consistent with the sequential financing hypothesis.
Keywords: Sequential financing, warrants, real options
JEL Classification: G32
Suggested Citation: Suggested Citation
Garcia-Feijoo, Luis and Howe, John S., Matching Financial and Real Investment Options: Evidence from Warrant Calls. Available at SSRN: https://ssrn.com/abstract=631204
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