Charles A Dice Center Working Paper No. 2016-24
44 Pages Posted: 31 Dec 2016
Date Written: December 2016
Using quarterly data on IPOs and SEOs in 38 countries over the period 1995-2014, we show that changes in equity issuance are significantly and positively related to lagged changes in aggregate local market liquidity. This relation is at least as economically significant as the well-known relation between equity issuance and lagged stock returns. It survives the inclusion of proxies for market timing, capital market conditions, growth prospects, asymmetric information, and investor sentiment, as well as the exclusion of the financial crisis. Changes in liquidity are less relevant for firms that face greater financial pressures, firms in less financially developed countries, and during the financial crisis.
Keywords: International finance, IPOs, SEOs, market liquidity, market timing
JEL Classification: G32, F30, G15
Suggested Citation: Suggested Citation
Hanselaar, Rogier and Stulz, René M. and Van Dijk, Mathijs A., Do Firms Issue More Equity When Markets Become More Liquid? (December 2016). Charles A Dice Center Working Paper No. 2016-24. Available at SSRN: https://ssrn.com/abstract=2891439 or http://dx.doi.org/10.2139/ssrn.2891439