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Issuance Expenses and Common Stock Offerings for Over-the-Counter Firms

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Author Info

  • Robert M. Hull

    (Washburn University)

  • Richard Fortin

    (New Mexico State University)

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    Abstract

    This study explores the role of issuance expenses in explaining the fall in stock value for OTC stock offerings that raise cash for debt reduction purposes. It estimates that over half of the sample's -2.79% two-day fall in stock value can be accounted for by issuance expenses when using a lower bound measure of issuance expenses. This estimate contrasts with the one-fifth estimate suggested by NYSE/AMEX studies that examine stock offerings that raise cash primarily for non-debt reduction purposes. The influence of issuance expenses is shown to be substantially greater when combination offerings are deleted, an upper bound measure of issuance expenses is employed, or the sample is restricted to those offerings with the greatest issuance expenses per outstanding share.

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    File URL: http://jefsite.org/RePEc/pep/journl/jef-1993-03-1-a-hull.pdf
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    Bibliographic Info

    Article provided by Pepperdine University, Graziadio School of Business and Management in its journal Journal of Small Business Finance.

    Volume (Year): 3 (1993)
    Issue (Month): 1 (Fall)
    Pages: 1-16

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    Handle: RePEc:pep:journl:v:3:y:1993:i:1:p:1-16

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    Web page: http://bschool.pepperdine.edu/jef
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    Related research

    Keywords: Issuance Expenses; Issuance Fees; Stock Offerings; Over-the-Counter; OTC;

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    References

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    1. Masulis, Ronald W, 1983. " The Impact of Capital Structure Change on Firm Value: Some Estimates," Journal of Finance, American Finance Association, vol. 38(1), pages 107-26, March.
    2. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
    3. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
    4. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    5. Peavy, John W, III & Scott, Jonathan A, 1985. "The Effect of Stock for Debt Swaps on Security Returns," The Financial Review, Eastern Finance Association, vol. 20(4), pages 303-27, November.
    6. Masulis, Ronald W., 1980. "The effects of capital structure change on security prices : A study of exchange offers," Journal of Financial Economics, Elsevier, vol. 8(2), pages 139-178, June.
    7. Brennan, Michael J & Kraus, Alan, 1987. " Efficient Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 42(5), pages 1225-43, December.
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