The Effect of Information Releases on the Pricing and Timing of Equity Issues: Theory and Evidence

@inproceedings{Korajczyk1988TheEO,
  title={The Effect of Information Releases on the Pricing and Timing of Equity Issues: Theory and Evidence},
  author={Robert A. Korajczyk and Deborah Lucas and R. L. Mcdonald},
  year={1988}
}
This paper develops a formal model of the timing and pricing of new equity issues, assuming that managers are better informed than new investors about the quality of the firm. Firms will prefer to issue equity when the market is most informed about the quality of the firm. This implies that equity issues tend to follow information releases, such as earnings announcements. The model also predicts a relation between the timing and pricing of equity issues. The price drop at the time of the equity… CONTINUE READING