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DETERMINANTS OF VALUATION EFFECTS FOR SECURITY OFFERINGS OF COMMERCIAL BANK HOLDING COMPANIES
Author(s) -
Wansley James W.,
Dhillon Upinder S.
Publication year - 1989
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1989.tb00515.x
Subject(s) - valuation effects , information asymmetry , business , monetary economics , debt , equity (law) , valuation (finance) , financial system , economics , finance , political science , law
In this study, the impact of security issuance by bank holding companies is examined in light of two hypotheses: the regulation or asymmetry reduction hypothesis and the bank capital hypothesis. Announcements of the issuance of common stock are associated with a significant negative effect, and the magnitude of this effect is similar to that found previously for utilities and smaller than that found for industrial firms. The market does not appear to treat subordinated debt announcements as similar to equity, although the debt qualifies as “capital” for regulatory purposes. Cross‐sectional regressions do not support asymmetric information models where all unexpected external announcements are viewed negatively. Rather, the type of security being issued is an important determinant of the announcement effect.