This study explores the role of issuance expenses in explaining the fall in stock value for OTC stock offerings that raise cash for debt reduction purposes. It estimates that over half of the sample's −2.79% two-day fall in stock value can be accounted for by issuance expenses when using a lower bound measure of issuance expenses. This estimate contrasts with the one-fifth estimate suggested by...

We argue that convertible securities can better attract investors with different beliefs on the firm’s future cash flows compared to straight bond and stock. We find that a firm is more likely to issue convertibles rather than stock and straight bond when investors are more heterogeneous in their beliefs. We also find that the positive impact of heterogeneous beliefs on the likelihood of a conv...

We analyze the factors that affect security issuance and its impacts on the volatility of stock returns before and after the issuance under heterogeneous beliefs and short sale constraints using the issuing sample of convertible bonds, corporate bonds and stocks in China’s security market during 2007 to 2012. The empirical tests identify that abnormal turnover can portray heterogeneous beliefs ...

I examine planned senior-for-junior and junior-for-senior transactions that are subsequently cancelled. I find statistically significant stock returns for issuance and cancellation announcements that are positively related to the direction of the leverage change. The magnitude and direction of the returns differ from previous research. Discrepancies are attributed to different issuance purposes.

One of the most prominent stylized facts in corporate finance is that firms are more likely to issue equity following 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 for their stock. When not accompanied by institutional purchases, stock price increases have little impact ...

When the shares are issued, that can be explained as an issuance of shares at their fair value or a stock split or the combination of both. Stock dividends can be considered as a combination of capitalization of retained earnings and stock split (stock split theory). But, it can also be explained by using fictitious transaction such as payment of cash dividend and subsequent issuance of shares ...

Countries need short, medium, and long-term investment plans for production growth and development. Different sources for these investments can be supplied through retained profit, stock issuance, and bank loans, or a combination them. Institutions and firms need huge amount of capitals for their survival, production, and also development of activities. In addition, these institutions and firms...

We study the issuance and payout policy that maximizes the value of a firm facing both agency costs of free cash-flow and external financing costs. We find that firms have target cash levels and optimally issue equity when they run out of cash. We characterize the process modelling the number of outstanding shares and the dynamics of the stock prices. In line with the leverage effect identified...

Research of common stock offerings finds that the negative impact of issuance expenses can account for over three-fifths of the fall in the announcement period returns. Given the importance of issue costs, we extend the research by offering a model to estimate expected values for issue costs. This model can be used to generate the expected fall in stock value resulting from issue costs. We also...