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FIRM PERFORMANCE AND SECURITY TYPE IN SEASONED OFFERINGS: AN EMPIRICAL EXAMINATION OF ALTERNATIVE SIGNALING MODELS
Author(s) -
Patel Ajay,
Emery Douglas R.,
Lee Yul W.
Publication year - 1993
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.1475-6803.1993.tb00139.x
Subject(s) - convertible bond , debt , leverage (statistics) , issuer , business , convertible , monetary economics , common stock , capital structure , stock (firearms) , convertible arbitrage , financial system , financial economics , economics , finance , capital asset pricing model , structural engineering , machine learning , arbitrage pricing theory , mechanical engineering , paleontology , computer science , risk arbitrage , engineering , biology , context (archaeology)
Abstract In this paper we examine the long‐term performance of publicly traded firms that issue straight debt, convertible debt, or common stock. Declines in firm performance following issuance are consistent with declines in firm value at announcement and issuance, and suggest that convertible debt and common stock are substantially equivalent. This study is consistent with the pecking‐order and Miller‐Rock models, but inconsistent with the leverage‐signaling model. Despite a significant decline following issuance, firms issuing common stock or convertible debt perform better, on average, than the industry before, at, and after issuance. This is consistent with younger, riskier, higher‐growth firms being the predominant issuers of common stock and convertible debt.