The use of warrants as underwriter compensation in initial public offerings

The use of warrants as underwriter compensation in initial public offerings Previous research suggests that offering costs are higher when warrants are used to compensate underwriters. This finding potentially arises from a failure to account for self-selection in estimating offering cost relations. Using methods that account for self-selection, I find that underpricing and total offering costs are reduced for firms using warrants as underwriter compensation, consistent with the hypothesis that issuers choose compensation contracts which minimize costs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

The use of warrants as underwriter compensation in initial public offerings

Journal of Financial Economics, Volume 38 (1) – May 1, 1995

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Publisher
Elsevier
Copyright
Copyright © 1995 Elsevier Ltd
ISSN
0304-405x
D.O.I.
10.1016/0304-405X(94)00805-B
Publisher site
See Article on Publisher Site

Abstract

Previous research suggests that offering costs are higher when warrants are used to compensate underwriters. This finding potentially arises from a failure to account for self-selection in estimating offering cost relations. Using methods that account for self-selection, I find that underpricing and total offering costs are reduced for firms using warrants as underwriter compensation, consistent with the hypothesis that issuers choose compensation contracts which minimize costs.

Journal

Journal of Financial EconomicsElsevier

Published: May 1, 1995

References

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