The choice of seasoned-equity selling mechanism: Theory and evidence

Bjorn Eckbo () and Oyvind Norli ()

No 2004/17, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: Extending the Myers and Majluf (1984) framework, we present a model for the choice of seasoned-equity selling mechanism. A sequential pooling equilibrium exists which implies a positive market reaction to certain flotation strategies. We examine the model implications using the market reaction to issues on the Oslo Stock Exchange using the full range of flotation methods. The average market reaction is non-negative across all methods, and significantly positive for both rights offerings and private placements, as predicted. We also show that average long-run abnormal stock returns to OSE issuers are indistinguishable from zero, supporting the market rationality assumption underpinning the flotation game.

Keywords: Seasoned-equity selling mechanism; Sequential pooling equilibrium; Oslo Stock Exchange; Flotation methods (search for similar items in EconPapers)
JEL-codes: D50 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2004-12-17
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The Choice of Seasoned-Equity Selling Mechanism: Theory and Evidence (2005)
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