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Do Firms Issue More Equity When Markets Become More Liquid?


  • Hanselaar, Rogier

    (Erasmus University Rotterdam)

  • Stulz, Rene M.

    (Ohio State University)

  • Van Dijk, Mathijs A.

    (Erasmus University Rotterdam)


Using quarterly data on IPOs and SEOs in 38 countries over the period 1995-2014, we show that changes in equity issuance are significantly and positively related to lagged changes in aggregate local market liquidity. This relation is at least as economically significant as the well-known relation between equity issuance and lagged stock returns. It survives the inclusion of proxies for market timing, capital market conditions, growth prospects, asymmetric information, and investor sentiment, as well as the exclusion of the financial crisis. Changes in liquidity are less relevant for firms that face greater financial pressures, firms in less financially developed countries, and during the financial crisis.

Suggested Citation

  • Hanselaar, Rogier & Stulz, Rene M. & Van Dijk, Mathijs A., 2017. "Do Firms Issue More Equity When Markets Become More Liquid?," Working Paper Series 2016-24, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  • Handle: RePEc:ecl:ohidic:2016-24

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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