Does Managerial ability matter for the choice of Seasoned Equity offerings?

We provide evidence that managerial ability is positively and significantly related to the issuance method decision of seasoned equity offerings (SEOs) in the U.S. market. Our result is robust after controlling for various internal and external governance mechanisms, addressing the problem of endogeneity, and adopting a number of alternative specifications. We further find that the impact of managerial ability on the SEO issuance choice is stronger for firms with higher information asymmetry, CEO duality and weaker governance settings. Overall, our study supports the notion that higher managerial ability is perceived as a positive quality certification on firm information environments

Do family firms pay less for external funding?

We examine the impact of family’s presence on the cost of raising external funds by family-run enterprises. Using a sample of Australian publicly listed firms, we find a significantly negative relation between cost of newly raised capital and family presence. Moreover, we show that this relationship varies with the quality of corporate governance and the quality of firm’s information environment. Further, we conduct several robustness checks and consistently find that our main results remain unchanged. Overall, our evidence suggests that family firms have easier access to external financing fostered by family involvement in the ownership and control

Does Managerial ability matter for the choice of Seasoned Equity offerings?

We provide evidence that managerial ability is positively and significantly related to the issuance method decision of seasoned equity offerings (SEOs) in the U.S. market. Our result is robust after controlling for various internal and external governance mechanisms, addressing the problem of endogeneity, and adopting a number of alternative specifications. We further find that the impact of managerial ability on the SEO issuance choice is stronger for firms with higher information asymmetry, CEO duality and weaker governance settings. Overall, our study supports the notion that higher managerial ability is perceived as a positive quality certification on firm information environments

Going Global: Evidence from India

American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) remain one of the predominant routes used by firms in emerging economies to list overseas. However, the aftermarket performance of ADR/GDR issuances is not widely researched amongst emerging economies. Using an Indian sample of ADR and GDR issues, we analyse the short and long-term performance of these firms. We adopt an event study methodology to assess the short-term performance and Lyon et al, (1999)’s approach to examine the long-term performance. We also examine the changes in firms’ operating performance following ADR/GDR issuances. The results show that the short-term buy and hold abnormal returns for ADRs are relatively better than GDRs and in the long run yield positive abnormal returns. These firms also have better operating performance post their overseas issuance in the American stock markets and finally the results also show that ADR issues is a key driver in firm performance

The impact of audit quality in rights offerings

Using audit quality as our core focus, we take a fresh look at the tradability and standby status in rights offerings, and the market reaction during the subscription period in the US market. We find that firms with high audit quality are more likely to choose tradable or full standby rights issues. We also find that the subscription period price reaction is positively related to audit quality and negatively related to issue price discount. These results demonstrate an important role played by the choice of auditors in the design of rights offerings, particularly in mitigating the negative price reaction during the subscription period

Does managerial tone matter for stock liquidity? Evidence from textual disclosures

This study investigates the effect of managerial tone on stock liquidity using a sample of U.S.-listed firms over the 1994-2019 period. We find that firms with SEC filings exhibiting more positive managerial tone experience higher stock liquidity. Our findings remain unchanged after controlling for firm fixed effects, propensity score matching, and using alternative variable approaches. Further, we identify that the relationship is less pronounced during times of high policy uncertainty measured by EPU and presidential elections. Overall, this paper provides evidence that the management tone in SEC filings has price discovery and efficiency implications for investor trading decisions

Audit Quality and Seasoned Equity Offerings Methods

Using a sample of U.S. seasoned equity offering (SEO) during the period 2002-2017, we document that audit quality is associated with SEO issuance method choice. Specifically, firms with higher quality auditors are more likely to adopt the accelerated offerings issue method instead of using other seasoned equity offering methods. We also identify that audit tenure and industry audit specialization influence the relation between audit quality and the likelihood of undertaking accelerated SEO offerings, and that the relationship is more pronounced in the presence of weaker firm-level information and governance environments. Extending from the conclusion that accelerated offerings serve as a quality certification mechanism, we also find that firms completing accelerated offerings enjoy lower audit fees in subsequent years. These firms also exhibit superior post-SEO-issue long-term abnormal stock performance. Overall, our study shows that the certifying and monitoring role of auditors is valuable to clients, underwriters, and investors in SEO transactions

Global Policy Uncertainty and Cross-Border Acquisitions

Policy uncertainty has been documented to have a significant impact on corporate investment decisions. This paper investigates the effect of policy uncertainty on cross-border acquisitions. We find a significant monotonic relationship between the size of the acquired equity stake in a target firm and the level of policy uncertainty in the target’s country of origin. More specifically, the acquirer is less inclined to purchase a sizeable ownership stake in the target firm, if the target is domiciled in unstable macroeconomic environment. Moreover, we find that acquirers are less willing to pay in cash if the target faces high policy uncertainty. The above results do not seem to depend on the quality of the country’s institutional environment and are robust to alternative econometric specifications. Our study discusses policy implications and should be of interest to academics as well as finance practitioners

Strategic archetypes, credit ratings, and cost of debt

We examine the impact of archetypes of strategic behavior in business, proposed by Miles and Snow (1978, 2003), on corporate credit ratings. Using a sample of U.S. non-financial firms between 1981 and 2016, we document that firms with prospector-type strategies experience significantly lower credit ratings than firms with defender- and analyzer-type approaches. Our results remain robust after controlling for firm fixed effects, using alternative model approaches, propensity score matching approach, and alternative measures. The negative effect on credit ratings is more pronounced in firms with weaker information and governance settings and during periods of high economic policy uncertainty. Further, we find prospector-type firms with weak credit ratings have a higher cost of debt. Overall, our findings stress the need for more transparent and stringent governance systems for prospector-type firms to receive favorable ratings

Policy uncertainty and seasoned equity offerings methods

Based on a sample of U.S. seasoned equity offering (SEO) during the period 2002–2017, we examine how the choice of equity issuance method changes in response to policy uncertainty. We find that firms subject to high policy uncertainty are less likely to use accelerated offerings rather than other types of traditional seasoned equity offerings. Our results are robust to alternative variable specifications, propensity score matching method, IV approach, and the inclusion of additional controls. Also, the effect of policy uncertainty on accelerated offering decision is weaker for firms with better information environment, earnings quality, and governance structures. Further, policy uncertainty increases the cost of funds and lowers long-run abnormal returns after SEOs for firms subject to high levels of policy uncertainty