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The Effect of Information Releases on the Pricing and Timing of Equity IssuesRobert A. KorajczykNorthwestern University - Kellogg School of Management Deborah J. LucasNorthwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER) Robert L. McDonaldNorthwestern University - Kellogg School of Management June 1, 1991 Review of Financial Studies, Vol. 4, No. 4, pp. 685-708, 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.
Number of Pages in PDF File: 34 Keywords: Equity Issues, Adverse Selection, Asymmetric Information JEL Classification: G32 Accepted Paper SeriesDate posted: November 3, 2011Suggested CitationContact Information
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