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The Effect of Information Releases on the Pricing and Timing of Equity Issues

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Author Info
Korajczyk, Robert A
Lucas, Deborah J
McDonald, Robert L

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Abstract

With time-varying adverse selection in the market for new equity issues, firms will prefer to issue equity when the market is most informed about the quality of the firm. This implies that equity issues tend to follow credible information releases. In addition, if the asymmetry in information increases over time between information releases, the price drop at the announcement of an equity issue should increase in the time since the last information relese. Using earnings releases as a proxy for informative events, we find evidence supporting these propositions. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 4 (1991)
Issue (Month): 4 ()
Pages: 685-708
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Handle: RePEc:oup:rfinst:v:4:y:1991:i:4:p:685-708

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
  1. Robert A. Korajczyk & Deborah J. Lucas & Robert L. McDonald, 1989. "Understanding Stock Price Behavior around the Time of Equity Issues," NBER Working Papers 3170, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Arnoud W.A. Boot & Anjan V. Thakor, 2003. "Disagreement and Flexibility: A Theory of Optimal Security Issuance and Capital Structure," Tinbergen Institute Discussion Papers 03-001/2, Tinbergen Institute. [Downloadable!]
    Other versions:
  3. Jean Helwege & Nellie Liang, 2003. "Initial public offerings in hot and cold markets," Finance and Economics Discussion Series 2003-04, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  4. Christopher Polk & Paola Sapienza, 2004. "The Real Effects of Investor Sentiment," NBER Working Papers 10563, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. KENT D. DANIEL & David Hirshleifer & AVANIDHAR SUBRAHMANYAM, 2004. "A Theory of Overconfidence, Self-Attribution, and Security Market Under- and Over-reactions," Finance 0412006, EconWPA. [Downloadable!]
  6. A. Panno, 2003. "An empirical investigation on the determinants of capital structure: the UK and Italian experience," Applied Financial Economics, Taylor and Francis Journals, vol. 13(2), pages 97-112, January. [Downloadable!] (restricted)
  7. Wang, Jun & Zhang, Ge, 2003. "Heterogeneous beliefs and employee stock options," Working Papers 2003-14, University of New Orleans, Department of Economics and Finance. [Downloadable!]
  8. Armando Gomes & Gordon Phillips, 2005. "Why Do Public Firms Issue Private and Public Securities?," NBER Working Papers 11294, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Tijs de Bie & Leo de Haan, 2004. "Does market timing drive capital structures? A panel data study for Dutch firms," DNB Working Papers 016, Netherlands Central Bank, Research Department. [Downloadable!]
  10. Javier Suarez & Andres Almazan & Sheridan Titman, 2004. "Stakeholders, Transparency And Capital Structure," Working Papers wp2004_0401, CEMFI. [Downloadable!]
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  11. Zhang, Ge, 2004. "Market valuation and employee stock options," Working Papers 2003-13, University of New Orleans, Department of Economics and Finance. [Downloadable!]
  12. Itay Goldstein & Assaf Razin, 2005. "An Information-Based Trade Off between Foreign Direct Investment and Foreign Portfolio Investment," NBER Working Papers 11757, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Ljungqvist, Alexander P & Nanda, Vikram & Singh, Rajdeep, 2001. "Hot Markets, Investor Sentiment and IPO Pricing," CEPR Discussion Papers 3053, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Malcolm Baker & Jeremy C. Stein & Jeffrey Wurgler, 2002. "When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms," NBER Working Papers 8750, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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