Overvalued Equity and Financing Decisions (Presentation Slides)

35 Pages Posted: 26 May 2018

See all articles by Ming Dong

Ming Dong

York University - Schulich School of Business

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Siew Hong Teoh

University of California, Irvine - Accounting Area

Date Written: July 26, 2012

Abstract

These are the presentation slides for the paper. We test whether and how equity overvaluation affects corporate financing decisions using an ex ante misvaluation measure that filters firm scale and growth prospects from market price. We find that equity issuance and total financing increase with equity overvaluation; but only among overvalued stocks; and that equity issuance is more sensitive than debt issuance to misvaluation. Consistent with managers catering to maintain overvaluation and with investment scale economy effects, the sensitivity of equity issuance and total financing to misvaluation is stronger among firms with potential growth opportunities (low book-to-market, high R&D, or small size) and high share turnover.

The paper is available at https://ssrn.com/abstract=1874726.

Keywords: financing decisions, equity issuance, overvalued equity, behavioral finance, market efficiency

JEL Classification: G14, G32, M41

Suggested Citation

Dong, Ming and Hirshleifer, David A. and Teoh, Siew Hong, Overvalued Equity and Financing Decisions (Presentation Slides) (July 26, 2012). Available at SSRN: https://ssrn.com/abstract=3179340 or http://dx.doi.org/10.2139/ssrn.3179340

Ming Dong (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext. 77945 (Phone)
416-736-5687 (Fax)

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Siew Hong Teoh

University of California, Irvine - Accounting Area ( email )

Irvine, CA 92697-3125
United States

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