Firm-Initiated versus Investor-Initiated Equity Issues
Stephen B. McKeon
University of Oregon - Department of Finance
March 28, 2013
Most observations of cash inflows from the sale of stock are not financing events triggered by the firm. Rather, they are initiated by investors, primarily through the exercise of employee stock options. In aggregate, investor-initiated issues exceed $1.1 trillion (2011$) between 1985 and 2011, and since 2001 are greater than the combined proceeds of all forms of manager-initiated issues (IPOs, SEOs and private placements). I study the implications for tests of financing decisions using a method that distinguishes the initiator category with a high degree of accuracy. I find that the observed relation in the literature between equity issuance and market conditions is driven in large measure by investor-initiated purchases of shares.
Number of Pages in PDF File: 49
Keywords: employee stock options, financing decisions, windows of opportunity, market timing
JEL Classification: G14, G32working papers series
Date posted: September 2, 2011 ; Last revised: March 29, 2013
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