Long-run performance following private placements of equity

Michael Hertzel, Michael Lemmon, James S. Linck, Lynn Rees

Research output: Contribution to journalArticle

162 Scopus citations

Abstract

Public firms that place equity privately experience positive announcements effects, with negative post-announcement stock-price performance. This finding is inconsistent with the underreaction hypothesis. Instead, it suggests that investors are overoptimistic about the prospects of firms issuing equity, regardless of the method of issuance. Further, in contrast to public offerings, private issues follow periods of relatively poor operating performance. Thus, investor overoptimism at the time of private issues is not due to the behavioral tendency to overweight recent experience at the expense of long-term averages.

Original languageEnglish (US)
Pages (from-to)2595-2617
Number of pages23
JournalJournal of Finance
Volume57
Issue number6
DOIs
StatePublished - Dec 2002
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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