Controlling Shareholders and Market Timing in Share Issuance

73 Pages Posted: 18 Mar 2011 Last revised: 28 Mar 2013

See all articles by Borja Larrain

Borja Larrain

Pontificia Universidad Catolica de Chile

Francisco Urzúa I.

City University London - Sir John Cass Business School

Date Written: March 28, 2013

Abstract

We examine market timing in the equity issuance of firms controlled by large shareholders using a hand-collected data set of controlling shareholders’ ownership stakes in Chile between 1990 and 2009. When a firm issues shares, the controlling shareholder can either maintain or change his ownership stake depending on how many of the new shares he subscribes. Issuance predicts poor future returns and is preceded by high returns, but only when the controlling shareholder’s stake is significantly reduced. Consistent with market timing, the results are stronger in the absence of institutional investors and in hot issuance markets.

Suggested Citation

Larrain, Borja and Urzua, Francisco, Controlling Shareholders and Market Timing in Share Issuance (March 28, 2013). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1786462 or http://dx.doi.org/10.2139/ssrn.1786462

Borja Larrain

Pontificia Universidad Catolica de Chile ( email )

Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile

HOME PAGE: http://economiayadministracion.uc.cl/personal/blarrain/

Francisco Urzua (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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