Market Feedback and Equity Issuance: Evidence from Repeat Equity Issues

Posted: 3 Aug 2010

See all articles by Armen Hovakimian

Armen Hovakimian

Baruch College - Zicklin School of Business

Irena Hutton

Florida State University - College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 2, 2010

Abstract

Higher first-year post-issue returns are associated with a significantly higher probability of follow-on equity issuance over the next 5 years. This result holds when we control for pre-issue returns and other factors known to affect the probability of equity issuance. The result is most consistent with the market feedback hypothesis that a high post-issue return encourages managers to increase the firm’s investment because it implies that, in the market’s view, the marginal return to the project is high.

Keywords: seasoned equity offering, equity issue, market timing, market feedback

JEL Classification: G30, G31, G32

Suggested Citation

Hovakimian, Armen and Hutton, Irena, Market Feedback and Equity Issuance: Evidence from Repeat Equity Issues (August 2, 2010). Journal of Financial and Quantitative Analysis (JFQA), Vol. 45, No. 3, 2010. Available at SSRN: https://ssrn.com/abstract=1652310

Armen Hovakimian (Contact Author)

Baruch College - Zicklin School of Business ( email )

One Bernard Baruch Way
Box B10-225
New York, NY 10010
United States
646-312-3490 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://zicklin.baruch.cuny.edu/faculty-profile/armen-hovakimian/

Irena Hutton

Florida State University - College of Business ( email )

821 Academic Way
Tallahassee, FL 32306-1110
United States
850.645.1520 (Phone)

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