Market Timing of Corporate Security Issues
Posted: 6 Sep 1999
Date Written: November 1994
In this study we investigate the timing of equity and debt issues by corporations in the United States relative to changes in the stock market, interest rates, and other economic activity. Our results are based on the multi- variate cross-sectional time series analysis of aggregate capital market activity using ARIMA and VAR econometric models.We find that the proportion of total as well as "seasoned" equity issuance increases following an increase in the stock market. However, the proportion of "unseasoned" equity issues, i.e., Initial Public Offerings is unaffected by stock market changes in the short run.We also find that the proportion of underwritten equity issues increases following an increase in stock prices, but is unaffected by changes in stock market volatility. It also appears that corporations prefer to issue convertible bonds following an increase in stock prices. We also present evidence indicating that the proportion of warrants issued increases and that the proportion of debt issued decreases following an increase in interest rates.
JEL Classification: G32
Suggested Citation: Suggested Citation