The Effect of Information Releases on the Pricing and Timing of Equity Issues

Review of Financial Studies, Vol. 4, No. 4, pp. 685-708, 1991

34 Pages Posted: 3 Nov 2011

Date Written: June 1, 1991

Abstract

With time-varying adverse selection in the market for new equity issues, firms will prefer to issue equity when the market is most informed about the quality of the firm. This implies that equity issues tend to follow credible information releases. In addition, if the asymmetry in information increases over time between information releases, the price drop at the announcement of an equity issue should increase in the time since the last information release. Using earnings releases as a proxy for informative events, we find evidence supporting these propositions.

Keywords: Equity Issues, Adverse Selection, Asymmetric Information

JEL Classification: G32

Suggested Citation

Korajczyk, Robert A. and Lucas, Deborah J. and McDonald, Robert L., The Effect of Information Releases on the Pricing and Timing of Equity Issues (June 1, 1991). Review of Financial Studies, Vol. 4, No. 4, pp. 685-708, 1991, Available at SSRN: https://ssrn.com/abstract=1953337

Robert A. Korajczyk (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive, Room 4357
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847-491-8336 (Phone)
847-491-7781 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/korajczyk_robert.aspx#research

Deborah J. Lucas

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8333 (Phone)
847-491-5719 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Robert L. McDonald

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8344 (Phone)
847-491-5719 (Fax)

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