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Corporate Earnings and Financings: An Empirical Analysis


  • Hansen, Robert S
  • Crutchley, Claire


This article examines the long-term behavior of corporate earnings around three corporate financing events: sales of common stock, convertible bonds, and straight bonds. The article shows that earnings declined for all issuers and that more capital is raised the larger the earnings decline. These findings indicate that external financings are motivated by earnings declines. No evidence is found of a relationship between the size of the subsequent earnings downturn or the amount of capital raised and stock price reactions to the financing announcements. These findings suggest that security sales did not systematically provide new information about either the magnitude of subsequent earnings downturn or the amount of financing. Copyright 1990 by the University of Chicago.

Suggested Citation

  • Hansen, Robert S & Crutchley, Claire, 1990. "Corporate Earnings and Financings: An Empirical Analysis," The Journal of Business, University of Chicago Press, vol. 63(3), pages 347-371, July.
  • Handle: RePEc:ucp:jnlbus:v:63:y:1990:i:3:p:347-71

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    References listed on IDEAS

    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Nelson, Charles R & Startz, Richard, 1990. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 58(4), pages 967-976, July.
    3. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-1286, September.
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