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Do firms issue more equity when markets become more liquid?

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  • Hanselaar, Rogier M.
  • Stulz, René M.
  • van Dijk, Mathijs A.

Abstract

Using quarterly data on initial public offerings (IPOs) and seasoned equity offerings (SEOs) for 37 countries from 1995 to 2014, we show that changes in equity issuance are positively related to lagged changes in aggregate local stock market liquidity. This relation is as economically significant as the well-known relation between equity issuance and lagged stock returns. It survives the inclusion of proxies for market timing, capital market conditions, growth prospects, asymmetric information, and investor sentiment. Changes in liquidity are less relevant for issuance by firms with greater financial pressures and by firms in less financially developed countries.

Suggested Citation

  • Hanselaar, Rogier M. & Stulz, René M. & van Dijk, Mathijs A., 2019. "Do firms issue more equity when markets become more liquid?," Journal of Financial Economics, Elsevier, vol. 133(1), pages 64-82.
    • Handle: RePEc:eee:jfinec:v:133:y:2019:i:1:p:64-82
    DOI: 10.1016/j.jfineco.2018.12.004
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    More about this item

    Keywords

    Equity issuance; IPOs; SEOs; Market liquidity; International markets;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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