Sheldon B. Lubar School of Business
University of Wisconsin-Milwaukee
PO Box 742
Milwaukee, Wisconsin 53201-0742
NBER Working Papers and Publications
|November 1996||The Underreaction Hypothesis and the New Issue Puzzle: Evidence from Japan|
with Jun-Koo Kang, Rene M. Stulz: w5819
This paper investigates the long-term performance of Japanese firms issuing convertible debt or equity. We find that these firms perform poorly even though the stock-price reaction to convertible debt and equity issue announcements is not significantly negative for Japanese firms and Japanese firms do not issue equity or convertible debt following strong positive abnormal returns. Whereas in the U.S. underperformance appears to be concentrated in the smaller firms and in the firms with a high market-to-book ratio, this is not the case in Japan. The underperformance of Japanese issuing firms cannot be understood in terms of the underreaction hypothesis that some have advanced as an explanation for the poor returns of U.S. issuing firms.
Published: Kang, J. K., Y. C. Kim and R. M. Stulz. "The Underreaction Hypothesis And The New Issue Puzzle: Evidence From Japan," Review of Financial Studies, 1999, v12(3,Fall), 519-534. citation courtesy of
|October 1994||Investment Opportunities, Managerial Decisions, and the Security Issue Decision|
with Kooyul Jung, Rene M. Stulz: w4907
With agency costs of managerial discretion, equity financing is advantageous for the shareholders of firms with valuable investment opportunities but not for the shareholders of other firms. Accordingly, we find that firms with good investment opportunities are more likely to issue equity than debt, have a smaller abnormal return in absolute value when the issue is announced, and experience substantial asset growth following the issue. Firms that issue equity even though they do not have good investment opportunities experience a larger abnormal return in absolute value when the issue is announced and invest more after the issue than comparable firms that issue debt.
Published: Jung, Kooyul, Yong-Cheol Kim and Rene M. Stulz. "Timing, Investment Opportunities, Managerial Discretion, And The Security Issue Decision," Journal of Financial Economics, 1996, v42(2,Oct), 159-185.