Review of Quantitative Finance and Accounting
This paper examines whether investors’ valuations of cash and share-put warrants are influenced by their potential differential effect on firm solvency. It is motivated by the enactment of SFAS 150, which requires that all contingent put warrant obligations be classified as balance sheet liabilities regardless of put type. Consistent with the critics of SFAS150, we show that market participants differentially value cash and share-puts based on their solvency characteristics beyond the firm’s recorded assets and liabilities. Our results add to existing capital structure literature by suggesting that complex financial instruments (such as cash and share-puts) be reported separately from each other on a firm’s balance sheet.
“The final publication is available at Springer via http://dx.doi.org/10.1007/s11156-007-0033-z”.
Terando, William D.; Shaw, Wayne; and Smith, David, "Valuation and Classification of Company Issued Cash and Share-Puts" (2007). Scholarship and Professional Work - Business. 201.