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The Impact of the Source and Sequence of Information in Primary Equity Offerings
Author(s) -
Bonomo Vittorio A.,
Johnson Dana J.,
Thompson G. Rodney
Publication year - 1995
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1995.tb00823.x
Subject(s) - event study , equity (law) , event (particle physics) , economics , index (typography) , financial economics , actuarial science , business , econometrics , advertising , political science , computer science , history , law , world wide web , context (archaeology) , physics , archaeology , quantum mechanics
Empirical studies of the announcement effects of equity offerings have generally defined the event date as the earlier of the SEC registration date or the first mention in the Wall Street Journal (WSJ) , the implicit assumption being that the two types of announcements are equally informative. This study examines whether the source of the event announcement might influence a study's results and whether subsequent announcements from other sources elicit a market reaction. Specifically, this paper investigates whether Dow Jones News Wire (DJNW) announcements that differ in timing from either of these information events elicit a market response and, more important, whether impacts from the DJNW announcements alter the validity of the widely used methodology. The results of the paper indicate that, for issues that are not mentioned in the WSJ Index , there is a negative and significant return on the registration date. However, no matter whether the registration occurs before or after its mention on the DJNW, the share price reaction is greater from mention on the DJNW than at registration. This finding leads to the conclusion that the DJNW should be used as the event date and that press coverage