Article1993

FIRM PERFORMANCE AND SECURITY TYPE IN SEASONED OFFERINGS: AN EMPIRICAL EXAMINATION OF ALTERNATIVE SIGNALING MODELS

Ajay Khorana · Douglas R. Emery · Yul W. Lee

32 citations0/0 files storedThe Journal of Financial Research

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

Abstract In this paper we examine the long‐term performance of publicly traded firms that issue straight debt, convertible debt, or common stock. Declines in firm performance following issuance are consistent with declines in firm value at announcement and issuance, and suggest that convertible debt and common stock are substantially equivalent. This study is consistent with the pecking‐order and Miller‐Rock models, but inconsistent with the leverage‐signaling model. Despite a significant decline following issuance, firms issuing common stock or convertible debt perform better, on average, than the industry before, at, and after issuance. This is consistent with younger, riskier, higher‐growth firms being the predominant issuers of common stock and convertible debt.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1958The Cost of Capital, Corporation Finance and the Theory of Investment 2008The cost of capital, corporation finance and the theory of investment 1977The Determination of Financial Structure: The Incentive-Signalling Approach 1985Dividend Policy under Asymmetric Information 1986Equity issues and offering dilution 1986Valuation effects of security offerings and the issuance process 1982The Choice Between Equity and Debt: An Empirical Study

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