External monitoring and its effect on seasoned common stock issues

Myron B. Slovin, Marie Sushka, Carl D. Hudson

Research output: Contribution to journalArticle

57 Scopus citations

Abstract

This paper demonstrates that the market reaction to announcements of seasoned stock offerings varies with the presence of outside agents - accounting firms, commercial banks, and underwriters - who monitor the firm. The stock price reaction is a positive function of the quantity of bank debt in a firm's financial structure, the quality of the firm's investment banker, and the quality of the public accounting firm that serves as its external auditor. The evidence supports theoretical models that imply external agents audit, monitor, and certify decisions to issue seasoned common stock.

Original languageEnglish (US)
Pages (from-to)397-417
Number of pages21
JournalJournal of Accounting and Economics
Volume12
Issue number4
DOIs
StatePublished - Mar 1990

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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