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MARKET EXPECTATIONS AND THE VALUATION EFFECTS OF EQUITY ISSUANCE
Author(s) -
Akhigbe Aigbe,
Newman Melinda,
Safieddine Assem
Publication year - 2006
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.1475-6803.2006.00177.x
Subject(s) - private investment in public equity , private equity fund , business , valuation effects , equity (law) , equity capital markets , information asymmetry , club deal , equity risk , private equity secondary market , valuation (finance) , monetary economics , private equity , economics , finance , financial economics , political science , law
We examine how the wealth effects of equity offers are influenced by investors' expectation of the equity type (public or private) to be issued. Firms deviating to the public market may be issuing when information asymmetry or agency costs are high, and their wealth effects are more negative than for firms that are anticipated to issue equity publicly. Firms deviating to the private market, however, may signal firm undervaluation or monitoring benefits and experience more positive wealth effects than firms that are expected to issue equity privately. For the private issues, public market accessibility appears to influence the wealth effects.