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Patterns in the Timing of Corporate Event Waves

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  • Rau, P. Raghavendra
  • Stouraitis, Aris

Abstract

Corporate events happen in waves. In this paper, we examine the timing patterns of 5 different types of corporate event waves (new stock and seasoned equity issues, stock- and cash-financed acquisitions, and stock repurchases) using a comprehensive data set of more than 151,000 corporate transactions over the 25-year period from 1980 to 2004. We document a distinctive pattern, previously not found in the literature, in the way stock-related waves form. Corporate waves seem to start with new issue waves (seasoned equity offering preceding initial public offering waves), followed by stock-financed merger waves, followed in turn by repurchase waves. Our results hold over separate decades and across industries. Our results seem consistent with both the neoclassical efficiency hypothesis and the misvaluation hypothesis, and there are distinct periods when one or the other appears dominant.

Suggested Citation

  • Rau, P. Raghavendra & Stouraitis, Aris, 2011. "Patterns in the Timing of Corporate Event Waves," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(1), pages 209-246, February.
    • Handle: RePEc:cup:jfinqa:v:46:y:2011:i:01:p:209-246_00
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    Cited by:

    1. Anderson, Christopher W. & Huang, Jian & Torna, Gökhan, 2017. "Can investors anticipate post-IPO mergers and acquisitions?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 496-521.
    2. Loveland, Robert & Mulherin, J. Harold & Okoeguale, Kevin, 2021. "Deregulation, listing and delisting," Journal of Corporate Finance, Elsevier, vol. 69(C).
    3. Marco Bade, 2020. "Determinants of IPO-firms’ merger appetite," Review of Managerial Science, Springer, vol. 14(1), pages 193-219, February.
    4. John Berns & Patty Bick & Ryan Flugum & Reza Houston, 2022. "Do changes in MD&A section tone predict investment behavior?," The Financial Review, Eastern Finance Association, vol. 57(1), pages 129-153, February.
    5. Baxamusa, Mufaddal & Jalal, Abu, 2018. "Industry networks and IPO waves," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 129-146.
    6. Beladi, Hamid & Chao, Chi Chur & Hu, May, 2016. "A macro-analysis of financial decisions: An examination of special dividend announcements," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 162-181.
    7. Dimitris Andriosopoulos & Leonidas G. Barbopoulos, 2017. "Relative equity market valuation conditions and acquirers’ gains," Review of Quantitative Finance and Accounting, Springer, vol. 49(3), pages 855-884, October.
    8. De, Soumendra & Jindra, Jan, 2012. "Why newly listed firms become acquisition targets," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2616-2631.
    9. Giudici, Giancarlo & Bonaventura, Matteo, 2018. "The impact of M&A strategies on the operating performance and investments of European IPO firms," Journal of Economics and Business, Elsevier, vol. 95(C), pages 59-74.
    10. Lee, Charles M.C. & Qu, Yuanyu & Shen, Tao, 2019. "Going public in China: Reverse mergers versus IPOs," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 92-111.
    11. Boeh, Kevin & Dunbar, Craig, 2014. "IPO waves and the issuance process," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 455-473.
    12. Moin, Abdul & Guney, Yilmaz & Kalak, Izidin El, 2020. "In search of stock repurchases determinants in listed Indonesian firms during regulatory changes," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 145-165.
    13. Agliardi, Elettra & Amel-Zadeh, Amir & Koussis, Nicos, 2016. "Leverage changes and growth options in mergers and acquisitions," Journal of Empirical Finance, Elsevier, vol. 37(C), pages 37-58.
    14. Aktas, Nihat & Andries, Kathleen & Croci, Ettore & Ozdakak, Ali, 2019. "Stock market development and the financing role of IPOs in acquisitions," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 25-38.
    15. Botta, Marco, 2019. "First-move advantage in seasoned equity offerings: Evidence from European banks," Global Finance Journal, Elsevier, vol. 41(C), pages 1-12.
    16. Naaguesh Appadu & Anna Faelten & Mario Levis, 2013. "Acquisitions, SEOs, divestitures and IPO performance," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 17, pages 347-374, Edward Elgar Publishing.
    17. Gabriel J. Power & Neelam Rani & Anandadeep Mandal, 2022. "Corporate control and the choice of investment financing: the case of corporate acquisitions in India," Review of Quantitative Finance and Accounting, Springer, vol. 58(1), pages 41-68, January.
    18. Mark Humphery‐Jenner, 2013. "Strong Financial Laws Without Strong Enforcement: Is Good Law Always Better than No Law?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(2), pages 288-324, June.
    19. Wolfgang Bessler & Martin Seim, 2013. "Venture capital and IPO waves in Europe: an analysis of firm and performance characteristics," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 15, pages 295-326, Edward Elgar Publishing.
    20. Hu, May & Chao, Chi-Chur & Malone, Chris & Young, Martin, 2017. "Real determinants of stock split announcements," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 574-598.

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