Essays on Stock Issuance
- Publication date
- Publisher
- 2017
Abstract
Firms which issue new equity subsequently have lower returns than other
firms, but does the strength of the issuance effect vary in the cross section of
firms? The essay shows, that US firms with characteristics that makes them
“hard to value” have returns which are strongly related to their past issuance
activity, while the return of “easy to value” firms are less related to their past
issuance activity. In most cases the difference between “hard to value” and
“easy to value” firms are signiffcant.
As proxies for “hard to value”, I use three different types of firm characteristics.
First, I consider firms for which relatively little information is
available as “hard to value”. Examples are firms covered by few analysts and
small firms. Second, I consider firms with high levels of analyst disagreement
on stock price target, next quarter earnings per share and share recommendation
as “hard to value”. Third, firms with expected cash flows in the more
distant future are “hard to value”. These include firms with low earnings,
high asset growth, and low dividend yield