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

  • Robert M. Hull

    (Washburn University)

  • Richard Fortin

    (New Mexico State University)

Registered author(s):

    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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    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
    Contact details of provider: Postal: 24255 Pacific Coast Hwy, Malibu CA
    Web page: http://bschool.pepperdine.edu/jef

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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. Brennan, Michael J & Kraus, Alan, 1987. " Efficient Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 42(5), pages 1225-43, December.
    3. 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.
    4. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
    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. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    7. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
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