10 research outputs found
The information conveyed by debt and equity announcements in Australia
This paper aims to report the findings associated with the effects of share prices around the disclosure dates of four different debt-and-equity fund-raising events over a 12-year period from 1991 to 2003 in Australia. By applying the well-known event study approach, along with the data-trimming procedures, a new idea is to remove all known confounding events and make corrections for thin-trading bias. The observed statistically significant price effects are consistent with theories: a positive price effect is observed for straight-debt and private placements whereas negative price effects occur when convertible debt and rights issues are announced. The results pertaining to the private placement effect is reported for the first time on this market. These findings are consistent with leverage, agency, and asymmetric information theories. It is believed that this study contributes new evidence on private placements and other events adding to existing literature surrounding the matter at hand
The Information Conveyed by Debt and Equity Announcements in Australia
This paper aims to report the findings associated with the effects of share prices around the disclosure dates of four different debt-and-equity fund-raising events over a 12-year period from 1991 to 2003 in Australia.By applying the well-known event study approach, along with the data-trimming procedures, a new idea is to remove all known confounding events and make corrections for thin-trading bias.The observed statistically significant price effects are consistent with theories: a positive price effect is observed for straight-debt and private placements whereas negative price effects occur when convertible debt and rights issues are announced.The results pertaining to the private placement effect is reported for the first time on this market.These findings are consistent with leverage, agency, and asymmetric information theories. It is believed that this study contributes new evidence on private placements and other events adding to existing literature surrounding the matter at hand
Optimal capital structure and firm value, Australian evidence: 1991-2003
Received theories, namely optimal capital structure, pecking order and signalling, suggest a likely change in the value of a firm at the time financing decisions are disclosed to the market. This paper reports new findings of such a significant change in a firm's value when relative capital structure changes by 10-40 per cent. Relative capital structure is the change in a firm's capital structure relative to its industry median ratio. Abnormal return to a firm adjusting its capital structure in value-enhancing financing decisions closer to the industry ratio is positive compared to the abnormal returns when the ratio is adjusted away from industry median. These findings, consistent with theories, would appear to suggest that the industry relative ratio is a likely surrogate for optimal capital structure decisions for Australian firms
Capital market reaction to equity private placement, relative capital structure change and firm value: Australian evidence
Received theories, namely optimal capital structure, pecking order and signalling, suggest a likely change in the value of a firm at the time financing decisions are disclosed to the market. This paper reports new findings of such a significant change in a firm's value employing equity private placement as a proxy for changes in capital structure by 10-40 percent. It takes a new direction in research by using an idea of relative capital structure, which is the change in a firm's capital structure relative to its industry median ratio. Abnormal return to a firm adjusting its capital structure in value-increasing financing decisions closer to the industry ratio is positive compared to the abnormal returns when the ratio is adjusted away from industry median. In addition, theory-suggested firm-specific variables are found to be significantly correlated with the changes in the values of firms, particularly during event window close to disclosure of financing decisions. These findings, consistent with theories, would appear to suggest that the industry relative ratio is a likely surrogate for optimal capital structure decisions for Australian firms
Share price reactions to capital structure changes from rights issues
Abstract not available
Private placement, capital structure changes and share value in Australia
Abstract not available
Share price reaction to debt issuance and capital structure in Australia
This study expands the earlier research relating to the optimal capital structure propositions, by studying the impact of debt on share prices as a result of the changes in the debt-equity ratio. This paper expects to expand our understanding by postulating that there are actually 2 effects at work. The first is the signaling effect on share prices by announcement of 'debt' as the chosen means of financing. The second effect being the movement of the firm's debt-equity ratio relative to its industry median debt-equity ratio. It is argued that there would be an increase (decrease) in abnormal share returns when debt financing moves capital structure of a firm closer to (away from) the industry median debt-equity ratio. The abnormal returns observed at the disclosure time of debt issues are found to be significantly correlated with the capital structure changes. Thus, this study expects to fill a gap in the literature by showing the relationship between capital structure changes and the abnormal share returns at the time of debt issues. The results of this study is also expected to help policy makers at the macro level,and at the firm level as they make decisions as to the appropriate means of financing while trying to shake off the effects of the current financial crisis
Share price reaction to debt issuance and capital structure in Australia
This study expands the earlier research relating to the optimal capital structure propositions, by studying the impact of debt on share prices as a result of the changes in the debt-equity ratio. This paper expects to expand our understanding by postulating that there are actually 2 effects at work. The first is the signaling effect on share prices by announcement of 'debt' as the chosen means of financing. The second effect being the movement of the firm's debt-equity ratio relative to its industry median debt-equity ratio. It is argued that there would be an increase (decrease) in abnormal share returns when debt financing moves capital structure of a firm closer to (away from) the industry median debt-equity ratio. The abnormal returns observed at the disclosure time of debt issues are found to be significantly correlated with the capital structure changes. Thus, this study expects to fill a gap in the literature by showing the relationship between capital structure changes and the abnormal share returns at the time of debt issues. The results of this study is also expected to help policy makers at the macro level,and at the firm level as they make decisions as to the appropriate means of financing while trying to shake off the effects of the current financial crisis