Changes in Management Ownership and the Valuation Effects of Equity Offerings

Journal of Management and Governance, 2: 297-308, 1999

University of Alberta School of Business Research Paper No. 2013-227

Posted: 26 May 2013 Last revised: 30 May 2013

See all articles by Marco Bigelli

Marco Bigelli

University of Bologna - Department of Management

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Wayne Yu

City University of Hong Kong

Multiple version iconThere are 2 versions of this paper

Date Written: July 23, 1998

Abstract

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.

Suggested Citation

Bigelli, Marco and Mehrotra, Vikas and Morck, Randall K. and Yu, Wayne, Changes in Management Ownership and the Valuation Effects of Equity Offerings (July 23, 1998). Journal of Management and Governance, 2: 297-308, 1999; University of Alberta School of Business Research Paper No. 2013-227. Available at SSRN: https://ssrn.com/abstract=2269362

Marco Bigelli

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, 40126
Italy
+39 051 2098060 (Phone)
+39 051 6390612 (Fax)

Vikas Mehrotra (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Wayne Yu

City University of Hong Kong ( email )

Kowloon
Hong Kong

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