Changes in Management Ownership and the Valuation Effects of Equity Offerings
Journal of Management and Governance, 2: 297-308, 1999
Posted: 26 May 2013 Last revised: 30 May 2013
Date Written: July 23, 1998
Seasoned equity issues trigger share price declines, and this is usually interpreted as evidence of signalling. We ﬁnd that seasoned equity issues also typically result in much lower managerial ownership in U.S. ﬁrms. Jensen and Meckling (1976) predict a stock price decline when managerial ownership falls. We conduct several tests to distinguish agency explanations form signalling explanations, and conclude that both effects are present.
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