Information conveyed by seasoned security offerings: evidence from components of the bid–ask spread

Review of Financial Economics - Tập 9 - Trang 83-99 - 2000
Raymond M Brooks1, Ajay Patel2
1Department of Accounting, Finance, and Information Management, Oregon State University, 200 Bexell Hall, Corvallis, OR 97331, USA
2Babcock Graduate School of Management, Wake Forest University, Winston-Salem, NC 27109, USA

Tóm tắt

AbstractWe examine the relationship between the degree of informational asymmetry surrounding a firm and the equity market's reaction to a firm's announcement to sell seasoned securities. We use the adverse‐selection component of the bid–ask spread as a proxy for the informational asymmetry of a firm. For equity offers, we find that the greater the change in information asymmetry at announcement, the greater the decline in wealth. In addition, the largest decline in wealth for seasoned equity announcements is observed for firms with the largest level of pre‐event adverse‐selection components. For debt offers, the wealth decline is only significant for firms with the largest pre‐event levels of asymmetric information.

Tài liệu tham khảo

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Review of Financial Economics

Tập 9

83-99

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