Equity Issuances and Agency Costs: The Telling Story of Shareholder Approval Around the World

81 Pages Posted: 21 Jul 2017

Date Written: July 18, 2017

Abstract

Mandatory shareholder approval of equity issuances varies across and within countries. When shareholders approve issuances, average announcement returns are positive. When managers issue stock without shareholder approval, returns are negative and 4% lower. The closer the vote is to the issuance or the greater is the required plurality, the higher are the returns for public offers, rights offers, and private placements. When shareholder approval is required, rights offers predominate. When managers may issue stock without shareholder approval, public offers predominate. These findings suggest that agency problems affect equity issuances and challenge existing adverse-selection, market timing, and signaling explanations.

Keywords: Equity Issuances, Seasoned Equity Offerings (SEOs), Agency Costs, Mandatory Shareholder Voting, Corporate Governance

JEL Classification: G32, G14, G15

Suggested Citation

Holderness, Clifford G., Equity Issuances and Agency Costs: The Telling Story of Shareholder Approval Around the World (July 18, 2017). Available at SSRN: https://ssrn.com/abstract=3004872 or http://dx.doi.org/10.2139/ssrn.3004872

Clifford G. Holderness (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-2768 (Phone)
617-277-8071 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
194
rank
146,452
Abstract Views
723
PlumX