Abstract
AbstractIntangible investments such as R&D are expensed rather than capitalized due to accounting conservatism. Thus, firms with mostly intangible assets are subject to more constraints in external financing than others and need alternatives. I find that they increasingly use equity warrants as a solution by developing a novel data set from textual analysis. Out of 181,425 annual reports submitted to the US Securities and Exchange Commission during 1994–2018, 10,300 discuss the fair value of warrants. The proportion of warrant firms increased from 0.4% in 1994% to 8% in 2018. Logistic regressions confirm that intangible investments and financial constraints explain warrants.
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