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Equity Issues and Stock Price Dynamics

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Equity Issues and Stock Price Dynamics
American Finance Association

Equity Issues and Stock Price Dynamics Author(s): Deborah J. Lucas and Robert L. McDonald Source: The Journal of Finance, Vol. 45, No. 4 (Sep., 1990), pp. 1019-1043 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2328713 . Accessed: 16/07/2011 10:21
Your use of the JSTOR archive indicates your acceptance of JSTOR 's Terms and Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR 's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . http://www.jstor.org/action/showPublisher?publisherCode=black. . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

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THE JOURNAL OF FINANCE * VOL. XLV, NO. 4 * SEPTEMBER

1990

Equity Issues and Stock Price Dynamics
DEBORAH J. LUCAS and ROBERT L. McDONALD* ABSTRACT infinite horizonmodelof the equity issue This paperpresents an information-theoretic, decision. The model predicts that (a) equity issues on average are preceded by an abnormalpositive returnon the


References: Asquith, Paul and David W. Mullins, Jr., 1986, Equity issues and offering dilution, Journal of Financial Economics 15, 61-89. Barclay, Michael and Robert Litzenberger, 1988, Announcement effects of new equity issues and the use of intraday price data, Journal of Financial Economics 21, 71-99. Choe, Hyuk, Ronald Masulis, and Vikram Nanda, 1989, On the timing of seasoned common stock issues: Theory and evidence, Working Paper, Southern Methodist University. Daniel, Kent and Sheridan Titman, 1989, Investment under asymmetric information, Working Paper #22-89, Anderson Graduate School of Management, UCLA. Dann, Larry Y., 1981, Common stock repurchases: An analysis of returns to bondholders and stockholders, Journal of Financial Economics 9, 113-138. Drexel, Burnham, Lambert, 1974-1983, Public Offerings of Corporate Securities, New York. Dybvig, Philip and Jaime Zender, 1988, Capital structure and dividend irrelevance with asymmetric information, Working Paper, Yale University. Eckbo, Espen, 1986, Valuation effects of corporate debt offerings, Journal of Financial Economics 15, 119-151. Gale, Ian, 1987, Informational asymmetries, risk attenuation and dynamic signalling, Working Paper, University of Wisconsin Department of Economics. John, Kose and Joseph Williams, 1985, Dividends, dilution, and taxes: Signalling equilibrium, Journal of Finance 40, 1053-1070. Korajczyk, Robert, Deborah Lucas, and Robert L. McDonald, 1988, The effect of information releases on the pricing and timing of equity issues: Theory and evidence, Working Paper No. 2727, NBER. , Deborah Lucas, and Robert L. McDonald, 1990, Understanding stock price behavior around the time of equity issues, in R. Glenn Hubbard, ed.: Asymmetric Information, Corporate Finance, and Investment (University of Chicago Press, Chicago, IL). Masulis, Ronald and A. Korwar, 1986, Seasoned equity offerings: An empirical investigation, Journal of Financial Economics 15, 91-118. Mikkelson, Wayne H. and M. Megan Partch, 1986, Valuation effects of security offerings and the issuance process, Journal of Financial Economics 15, 31-60. Miller, Merton and Kevin Rock, 1985, Dividend policy under asymmetric information, Journal of Finance 40, 1031-1051. Myers, Stewart C. and Nicholas S. Majluf, 1984, Corporate financing and investment decisions when firms have information that investors do not have, Journal of Financial Economics 13, 187-221. Narayanan, M. P., 1988, Debt vs. equity under asymmetric information, Journal of Financial and Quantitative Analysis 23, 39-51. Scholes, Myron, 1972, The market for securities: Substitution versus price pressure and the effects of information on share prices, Journal of Business 45, 179-211. Seyhun, H. Nejat, 1986, Insiders profits, costs of trading, and market efficiency, Journal of Financial Economics 16, 189-212. Smith, Clifford W., 1977, Alternative methods for raising capital: Rights versus underwritten offerings, Journal of Financial Economics 5, 273-307. Vermaelen, Theo, 1981, Common stock repurchases and market signalling: An empirical study, Journal of Financial Economics 9, 139-183.
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