Equity Rights Issues in Spain: Flotation Costs and Wealth Effects

This paper analyses the flotation costs and the share price reaction of equity offerings in Spain. The results report a positive relationship between relative flotation costs and the underwriting of an issue, and a negative relationship between such costs and ownership concentration. Fixed flotation costs and a negative relationship with the gross offer proceeds are also observed. On average, there is a negative share price reaction on the date of the 'previous communication' to the "Comisión Nacional del Mercado de Valores". The different sub-samples analysed according to the underwriting of the issue and the discount offered reveal no statistical differences. Copyright Blackwell Publishers Ltd, 2003.

Security Choice, Information Effects and Firm Characteristics: A Factor Analytic Approach

Abstract:  We examine the marginal choice between debt and equity securities using a factor analytic approach. This data reduction property eliminates the need to select the one best variable to proxy for a particular theoretical construct. Our results reinforce numerous existing findings using traditional methods and suggest both static tradeoff and asymmetric information based considerations are relevant in determining security choice. Two new results are presented related to the accounting liquidity of the firm. First, the preference for equity is increasing with liquidity as suggested by the window of opportunity hypothesis. Secondly, the market response to equity issuance announcements is inversely related to the liquidity of the firm. Profitability and growth measures support Jensen's (1986) agency cost of free cash flow as a potential explanation for the second finding. Copyright Blackwell Publishers Ltd, 2004.