We examine why firms issue hybrid securities including CBs and BWs, what are the eterminants of choice of issuers between CBs and BWs and why market reactions to Bs and BWs issues are different in Korea. Our study is based on the sample of CBs and BWs that were issued in Korea between 2000 and 2010. 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 of issuing firms between CBs and BWs largely exist, even though these securities have very similar characteristics. Specifically, CBs are more likely issued by firms with more future growth opportunity whereas BWs are more likely issued by firms with higher short term growth rate. Third, we also find that the announcement effects of CBs are negative and statistically insignificant whereas the announcement effects of BWs are statistically significant and positive.
Keywords : hybrid securities, convertible bonds, bonds with warrant, motives, market reactions
