When Do High Stock Returns Trigger Equity Issues?
82 Pages Posted: 21 Mar 2007 Last revised: 31 Mar 2011
Date Written: March 2011
One of the most prominent stylized facts in corporate finance is that equity issues tend to follow periods of high stock returns. We document that firms exhibit such timing behavior only in response to high returns that coincide with strong institutional investor demand. When not accompanied by institutional purchases, stock price increases have little impact on the likelihood of equity issuance. The results highlight the importance of market reception for the timing of equity issues.
JEL Classification: G3
Suggested Citation: Suggested Citation