This paper is to investigate the impacts of derivative warrants issuance from January,1997 to April, 2001 on both price and trading volumes of underlying stock around theannouncement date in Taiwan stock market. The ndings on price and trading volumesbehaviors suggest that there may be substantial purchases of the underlying stock by theissuers at one day before the announcement date of derivative warrants issuance for meetingthe hedging demand, and there may be substantial purchases of the underlying stock by theissuer/informed-trader for the last 10 minutes prior to market closure on the announcementdate of derivative warrants issuance for meeting price manipulating/information leaking de-mands. Nevertheless, the ndings on price and trading volumes also suggest that theremay convey an unfavorable signal about the reactions to the issuers’ perception of futureperformance of the underlying stock by the public investors during two days after the an-nouncement date of derivative warrants issuance, which underlying stock underperforms thewhole market.
Aletheia University R.O.C.
National Taiwan University R.O.C.