Article1996

Is There a Window of Opportunity for Seasoned Equity Issuance?

455 citations0/0 files storedThe Journal of Finance

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

Abstract

ABSTRACT The aggregate volume of equity issues is used to search for periods when seasoned equity capital can be raised at favorable terms. We find that the price reaction to equity issue announcements in high equity issue volume (HOT) periods is approximately 200 basis points lower on average than in low equity issue volume (COLD) periods. The lower price reaction in hot markets is economically important and is independent of the macroeconomic characteristics of hot and cold markets. The evidence supports the existence of windows of opportunity for equity issues that result at least partially from reduced levels of asymmetric information.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1977Determinants of corporate borrowing 1984The Capital Structure Puzzle 1990Econometric Models and Economic Forecasts 1989Business conditions and expected returns on stocks and bonds 1995The New Issues Puzzle 1985Dividend Policy under Asymmetric Information 1984The Capital Structure Puzzle

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