Changes in Management Ownership and the Valuation Effects of Equity Offerings
Journal of Management and Governance Volume 2, Issue 4, pp 297-309, 1998
Posted: 7 Jun 2013
Date Written: July 6, 1997
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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