Corporate growth and the equity-debt choice
Bruce Burton (),
A. A. Lonie and
D. M. Power
Applied Economics Letters, 1996, vol. 3, issue 1, 1-4
In this paper we extend the analysis of earlier investigations into the relationship between patterns of corporate growth and the announcement of new financing (see for example, Pilotte 1992; Burton et al., 1993) by examining the growth in turnover and earnings achieved by equity and debt-issuing firms. We study the performance of UK firms which made new financing announcements between 1989 and 1991 and find (i) that corporate growth generally declined in the years which followed the announcement date and (ii) that equity-issuing firms exhibited higher pre-announcement growth in sales turnover and in earnings than their debt-issuing counterparts - significantly higher growth in the case of the expansion in the value of sales.
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