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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, G32

working papers series

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Date posted: September 2, 2011 ; Last revised: March 29, 2013

Suggested Citation

McKeon, Stephen B., Firm-Initiated versus Investor-Initiated Equity Issues (March 28, 2013). Available at SSRN: http://ssrn.com/abstract=1920985 or http://dx.doi.org/10.2139/ssrn.1920985

Contact Information

Stephen B. McKeon (Contact Author)
University of Oregon - Department of Finance ( email )
Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
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