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Growth Opportunities and the Stock Price Response to New Financing

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Author Info
Pilotte, Eugene
Abstract

The author documents the effect of growth opportunities on the stock price response to security offerings. For equity offerings, the stock price decline for mature firms exceeds the decline for growth firms. For straight and convertible debt offerings, mature firms experience a significant price decline while growth firms experience no significant price change. Regression analysis indicates that the stock price response to new financing is significantly, positively related to a variety of growth opportunity measures. Holding growth opportunities fixed, the stock price response depends on the type of security offered (equity vs. debt) and, for straight debt offerings, Moody's bond ratings. Copyright 1992 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 65 (1992)
Issue (Month): 3 (July)
Pages: 371-94
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Handle: RePEc:ucp:jnlbus:v:65:y:1992:i:3:p:371-94

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  1. Kooyul Jung & Yong-Cheol Kim & Rene M. Stulz, 1994. "Investment Opportunities, Managerial Decisions, and the Security Issue Decision," NBER Working Papers 4907, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Joseph F. Brazel & Elizabeth Webb, 2006. "CEO compensation and the seasoned equity offering decision," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 363-378. [Downloadable!]
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