Do Financing Expectations Affect Announcement and Long-run Stock Performance?
The practice of firms issuance of securities has been hypothesized in prior studies to be an adjustment toward optimal capital structure, a signal of true firm value in the presence of information asymmetry, or an attempt to take advantage of higher valuations through market timing. Employing transactions-level data and empirical modeling techniques developed for asset-pricing applications, we develop empirical models of the probability of firm security issuance, given the history of the firm and its characteristics. We classify firms based on these financing expectations, for instance labeling firms with high ex ante probability of issuing equity, equity-type firms, and those with high ex ante probability of issuing debt, debt-type firms. The paper then examines the impact of ex ante financing expectations on the announcement effect and long-run stock performance. The unique contribution of our paper is that we show, irrespective of the security issued, both the announcement effect and long-run stock market performance differ across firms with different financing expectations; equity-type firms have more negative average announcement returns and long run stock returns than debt-type firms. Furthermore, our long-run results reveal that long-run underperformance following security issuance is primarily driven by equity-type firms.
Mark Kamstra Debarshi Nandy Pei Shao
Finance Area, Schulich School of Business, York University, 4700 Keele Street, Toronto, Ontario, Can Finance Area, Room N226 SSB, Schulich School of Business, York University, 4700 Keele Street, Toront School of Business, University of Northern British Columbia, 3333 University Way, Prince George, Bri
国际会议
成都
英文
1-45
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）