IDEAS home Printed from https://ideas.repec.org/a/bla/jfnres/v15y1992i1p39-56.html
   My bibliography  Save this article

Adverse Selection, Spread Behavior, And Over‐The‐Counter Seasoned Equity Offerings

Author

Listed:
  • Niranjan Tripathy
  • Ramesh P. Rao

Abstract

In this paper the effects of over‐the‐counter seasoned equity issuances on the percentage bid‐ask spreads around announcement and offer dates are examined. A declining spread in the pre‐announcement period suggests that resolution of information asymmetry begins well before the announcement date. Further, using issue size as a proxy for the extent of information asymmetry, we observe that spreads for larger issues reach “normal” levels before the first public disclosure of the offering. For smaller issues this occurs only on the offer date. Results are consistent with the dealer experiencing reduced adverse information risk as a result of information‐gathering efforts during the underwriting process.

Suggested Citation

  • Niranjan Tripathy & Ramesh P. Rao, 1992. "Adverse Selection, Spread Behavior, And Over‐The‐Counter Seasoned Equity Offerings," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 15(1), pages 39-56, March.
    • Handle: RePEc:bla:jfnres:v:15:y:1992:i:1:p:39-56
    DOI: 10.1111/j.1475-6803.1992.tb00785.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-6803.1992.tb00785.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1475-6803.1992.tb00785.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edith Ginglinger & Laure Matsoukis & Fabrice Riva, 2013. "Seasoned Equity Offerings: Stock Market Liquidity and the Rights Offer Paradox," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(1-2), pages 215-238, January.
    2. repec:dau:papers:123456789/2939 is not listed on IDEAS
    3. Spiess, D. Katherine & Affleck-Graves, John, 1995. "Underperformance in long-run stock returns following seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 38(3), pages 243-267, July.
    4. Kryzanowski, Lawrence & Lazrak, Skander & Rakita, Ian, 2010. "Behavior of liquidity and returns around Canadian seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2954-2967, December.
    5. Kryzanowski, Lawrence & Rubalcava, Arturo, 2004. "Valuation effects of domestic and international seasoned equity offerings by Canadian cross-listed firms," Journal of Multinational Financial Management, Elsevier, vol. 14(2), pages 171-186, April.
    6. repec:dau:papers:123456789/3035 is not listed on IDEAS
    7. Craig W. Holden & Stacey Jacobsen & Avanidhar Subrahmanyam, 2014. "The Empirical Analysis of Liquidity," Foundations and Trends(R) in Finance, now publishers, vol. 8(4), pages 263-365, December.
    8. Lin, Ji-Chai & Wu, YiLin, 2013. "SEO timing and liquidity risk," Journal of Corporate Finance, Elsevier, vol. 19(C), pages 95-118.
    9. Labidi, Manel & Gajewski, Jean François, 2019. "Does increased disclosure of intangible assets enhance liquidity around new equity offerings?," Research in International Business and Finance, Elsevier, vol. 48(C), pages 426-437.
    10. repec:dau:papers:123456789/10852 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfnres:v:15:y:1992:i:1:p:39-56. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.