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The influence of earnings per share on capital issues: some evidence from UK companies

  • Ian Davidson
  • Chris Mallin
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    This paper investigates the simple hypothesis that when companies issue more capital, they have a tendency to select the type of capital, all other things being equal, which results in the higher short-term earnings per share (eps). The methodology employs probit analysis to test the hypothesis that the form of issue selected was that which gave the higher eps after controlling for other factors such as leverage and industry classification. The results lead us to conclude that there is evidence in capital issues of functional fixation on eps.

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    Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

    Volume (Year): 4 (1998)
    Issue (Month): 3 ()
    Pages: 305-309

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    Handle: RePEc:taf:eurjfi:v:4:y:1998:i:3:p:305-309
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    1. Miles, David, 1993. "Testing for Short Termisn in the UK Stock Market," Economic Journal, Royal Economic Society, vol. 103(421), pages 1379-96, November.
    2. Raymond Chiang & Ian Davidson & John Okunev, 1996. "Some Further Theoretical and Empirical Implications Regarding the Relationship between Earnings, Dividends and Stock Prices," Working Paper Series 60, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. Kaplan, Robert S & Roll, Richard, 1972. "Investor Evaluation of Accounting Information: Some Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 45(2), pages 225-57, April.
    4. Gaver, Jennifer J. & Gaver, Kenneth M. & Austin, Jeffrey R., 1995. "Additional evidence on bonus plans and income management," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 3-28, February.
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