Controlling shareholders and market timing in share issuance |
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Authors: | Borja Larrain Francisco Urzúa I |
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Institution: | 1. Pontificia Universidad Católica de Chile, Escuela de Administración and Finance UC, Avenida Vicuña Mackenna 4860, Macul, Santiago, Chile;2. Rotterdam School of Management, Erasmus University, The Netherlands |
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Abstract: | We examine market timing in the equity issuance of firms controlled by large shareholders using a hand-collected data set of controlling shareholders' ownership stakes in Chile between 1990 and 2009. When a firm issues shares, the controlling shareholder can either maintain or change his ownership stake depending on how many of the new shares he subscribes. Issuance predicts poor future returns and is preceded by high returns, but only when the controlling shareholder's stake is significantly reduced. Consistent with market timing, the results are stronger in the absence of institutional investors and in hot issuance markets. |
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Keywords: | G14 G32 G34 |
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