The effect of information releases on the pricing and timing of equity issues |
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| Authors: | Korajczyk, RA Lucas, DJ McDonald, RL |
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| Affiliation: | 1 Kellogg Graduate School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208-2006, USA
2 Northwestern University and National Bureau of Economic Research |
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| Abstract: | With time-varying adverse selection in the market for new equityissues, firms will prefer to issue equity when the market ismost informed about the quality of the firm. This implies thatequity issues tend to follow credible information releases.In addition, if the asymmetric in information increases overtime between information releases, the price drop at the announcementof an equity issue should increase in the time since the lastinformation release. Using earning releases as a proxy for informativeevents, we find evidence supporting these propositions. |
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