TY  - JOUR
AU  - Korajczyk,Robert A.
AU  - Lucas,Deborah
AU  - McDonald,Robert
TI  - The Effect of Information Releases on the Pricing and Timing of Equity  Issues:  Theory and Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2727
PY  - 1992
Y2  - February 1992
UR  - http://www.nber.org/papers/w2727
L1  - http://www.nber.org/papers/w2727.pdf
N1  - Author contact info:
Robert Korajczyk
Department of Finance
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208-2001
Tel: 847/491-8336
Fax: 847/491-5719
E-Mail: r-korajczyk@northwestern.edu

Deborah J. Lucas
MIT Sloan School of Management
100 Main Street, E62-640
Cambridge, MA 02142
Tel: 617/715-4816
E-Mail: dlucas@mit.edu

Robert McDonald
E-Mail: rmcdona4@csc.com
AB  - 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 issue announcement should increase in the time since the last information release, and the price drop at issue should increase with the time since the last information release or issue announcement. We test the predictions of the theory on a sample of NYSE, AMEX and OTC firms who issued equity over the period 1978-1983. We find evidence that there is a clustering of equity issues following earnings announcements and annual reports, and also that the price drop at the time of the equity issue is increasing in the time since the announcement of the issue.
ER  -