We examine why firms issue hybrid securities including both Convertible Bonds (CBs) and Bonds with Warrants (BWs), what characteristics of issuing firms affect the choice between CBs and BWs and why market reactions to the announcement of CBs and BWs offerings are different in Korea. Our study is based on the sample of CBs and BWs that were issued in Korea between 2000 and 2011. Our empirical results are as follows. First, we find that the characteristics of hybrid security issuers are quite different from those of non-hybrid security issuers. Second, we find that difference in motives and characteristics of issuing firms choosing between CBs and BWs largely exist, even though these securities have very similar characteristics. Lastly, we find that the announcement effects of both CBs and BWs are positive and statistically significant in Korea, which is different from the studies for other countries.
Key Words : hybrid securities, convertible bonds, bonds with warrant, motives, market reactions
