TY  - JOUR
AU  - Kim,Woojin
AU  - Weisbach,Michael S.
TI  - Motivations for Public Equity Offers: An International Perspective
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11797
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11797
L1  - http://www.nber.org/papers/w11797.pdf
N1  - Author contact info:
Woojin Kim
SNU Business School
Seoul National University
1 Gwanak Ro
Gwanak-gu
Seoul, 151-916
Korea
Tel: +82-2-880-5831
E-Mail: woojinkim@snu.ac.kr

Michael Weisbach
Department of Finance
Fisher College of Business
Ohio State University
2100 Neil Ave.
Columbus, OH  43210
Tel: 614/292-3264
E-Mail: weisbach.2@osu.edu
AB  - This paper examines the extent to which investment financing and market-timing explanations motivate public equity offers. We consider a sample of 16,958 initial public offerings and 12,373 seasoned equity offerings from 38 countries between 1990 and 2003. We provide estimates of the change in each accounting variable for each dollar raised in an equity offer, and for each dollar of internally generated cash. Our estimates imply that firms invest 18.8 cents in R&D and 7.3 cents in capital expenditures for an incremental dollar raised in an equity offer during the year following the offer, rising to 84.8 cents and 14.3 cents when the change is measured over a four-year period. These findings are consistent with one motive for the equity offer being to raise capital for investment. However, firms also hold onto much of the cash they raised, and this fraction is higher when the firm has a high q. In addition, firms are more likely to issue secondary shares, which are usually sold by insiders, when q is high, enabling insiders to benefit personally from potential overvaluation. These results suggest that market timing as well as investment financing is a motivation for equity offers.
ER  -