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Market Expectations And The Valuation Effects Of Equity Issuance

Author

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  • Aigbe Akhigbe
  • Melinda Newman
  • Assem Safieddine

Abstract

We examine how the wealth effects of equity offers are influenced by investors' expectation of the equity type (public or private) to be issued. Firms deviating to the public market may be issuing when information asymmetry or agency costs are high, and their wealth effects are more negative than for firms that are anticipated to issue equity publicly. Firms deviating to the private market, however, may signal firm undervaluation or monitoring benefits and experience more positive wealth effects than firms that are expected to issue equity privately. For the private issues, public market accessibility appears to influence the wealth effects.

Suggested Citation

  • Aigbe Akhigbe & Melinda Newman & Assem Safieddine, 2006. "Market Expectations And The Valuation Effects Of Equity Issuance," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(2), pages 253-269, June.
    • Handle: RePEc:bla:jfnres:v:29:y:2006:i:2:p:253-269
    DOI: 10.1111/j.1475-6803.2006.00177.x
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    Cited by:

    1. Suichen Xu & Janice How & Peter Verhoeven & Tom Smith, 2017. "Corporate governance and private placement issuance in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 907-933, September.

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