Abstract

http://ssrn.com/abstract=968345
 
 

References (47)



 
 

Citations (4)



 


 



Public Equity Issues and the Scope for Market Timing


Hannes F. Wagner


Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

July 1, 2008


Abstract:     
This paper tests whether and how market timing explains public equity offerings and consequently firm leverage. Prior research has subsumed two mechanisms under the market timing terminology. One is a mispricing mechanism with irrational investors or managers, the other is due to fluctuations in adverse selection costs. Using a comprehensive sample of SEO and IPO firms I find no support for the mispricing mechanism, but evidence consistent with the adverse selection mechanism. When asymmetric information is low, firms rationally issue equity to finance future investment. Moreover, equity is not mispriced when issued. Inconsistent with both market timing arguments however, issuing firms releverage through increased debt issues and within three years eliminate the impact of market timing on leverage.

Number of Pages in PDF File: 48

Keywords: capital structure, initial public offering, market timing, seasoned equity offering

JEL Classification: G14, G32

working papers series


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Date posted: March 6, 2007 ; Last revised: August 5, 2008

Suggested Citation

Wagner, Hannes F., Public Equity Issues and the Scope for Market Timing (July 1, 2008). Available at SSRN: http://ssrn.com/abstract=968345 or http://dx.doi.org/10.2139/ssrn.968345

Contact Information

Hannes F. Wagner (Contact Author)
Bocconi University - Department of Finance ( email )
Via Roentgen 1
Milano, MI 20136
Italy
HOME PAGE: http://faculty.unibocconi.eu/hanneswagner
Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )
Via Roentgen 1
Milan, 20136
Italy
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