WashU researchers find ways to more efficiently reclaim useful feedstock from waste

This study examines the short- and long-term stock performance of small- and medium-sized enterprises (SMEs) following the issuance of hybrid securities—including bonds with warrants, convertible bonds, and exchangeable bonds—in the KOSDAQ market from 2016 to 2020. Using a sample of 204 issuers, we employ event study methodology and buy-and-hold abnormal returns to evaluate stock performance around the announcement date and over extended periods. Our findings indicate significantly positive cumulative abnormal returns in the short run, suggesting investor optimism. However, long-run analysis reveals substantial underperformance, particularly for bonds with warrants and exchangeable bonds, with significant declines over two- and three-year horizons. These results imply that managers may exploit overvaluations in hybrid securities markets, leading to long-term underperformance. Firm-specific factors such as growth opportunities, financial investor involvement, and corporate governance also influence performance. This study contributes to the literature by focusing on an emerging market context and incorporating exchangeable bonds, offering novel insights for investors and policymakers in emerging economies.