Abstract

http://ssrn.com/abstract=1947131
 
 

Citations (48)



 


 



Equity Issues with Time-Varying Asymmetric Information


Robert A. Korajczyk


Northwestern University - Kellogg School of Management

Deborah J. Lucas


Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Robert L. McDonald


Northwestern University - Kellogg School of Management

October 1, 1991

Journal of Financial and Quantitative Analysis (JFQA), Vol. 27, No. 3, 1992

Abstract:     
This paper develops a formal model of the effect of time-varying asymmetric information on the timing and pricing of equity issues when managers are better informed than outside investors. We assume that as time passes, the adverse selection problem becomes more severe as more managers receive a private signal. Under this assumption, the model predicts temporal variation in the quantity of issues, with a bunching of issues after information releases. It also predicts that the price drop at issue announcement increases with the time since the last information release. These predictions are consistent with several recent empirical studies relating equity issues to earnings and dividend announcements.

Number of Pages in PDF File: 32

Keywords: Equity Issues, Adverse Selection, Asymmetric Information

JEL Classification: G32

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Date posted: October 22, 2011  

Suggested Citation

Korajczyk, Robert A. and Lucas, Deborah J. and McDonald, Robert L., Equity Issues with Time-Varying Asymmetric Information (October 1, 1991). Journal of Financial and Quantitative Analysis (JFQA), Vol. 27, No. 3, 1992. Available at SSRN: http://ssrn.com/abstract=1947131

Contact Information

Robert A. Korajczyk
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8336 (Phone)
847-491-5719 (Fax)
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)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert L. McDonald (Contact Author)
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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