Book Title: | NA |
Year Published: | 2004 |
Month Published: | NOV |
Author: | Schill, MJ |
Book Group Author: | NA |
Abstract: | This paper examines how market volatility affects corporate financing transactions. Firms face substantial uncertainty with respect to the price, demand, and after-market costs associated with raising public capital. The ability to effectively hedge this risk is critical to the efficient financing of firm capital needs. Using monthly US equity-related financing transactions from 1970 to 1998, 1 find that market volatility dampens financing transactions, particularly among small or unseasoned firms. Periods of above normal market volatility are associated with a significant 13% decline in the frequency of initial public offering (IPO) transactions and a 21% decline in the number of IPO dollars raised. Increased market volatility generates greater underwriting fees but does not affect IPO underpricing. The findings are most consistent with Mandelker and Raviv's [J. Finance 32 (1977) 683] model of costly distribution risk bearing., (C) 2003 Elsevier B.V. All rights reserved. |
Pages: | 659-681 |
URL: | NA |
Volume: | 10 |
Number: | 5 |
Journal: | JOURNAL OF CORPORATE FINANCE |
Journal ISO: | J. Corp. Financ. |
Organization: | NA |
Publisher: | ELSEVIER SCIENCE BV |
ISBN: | NA |
ISSN: | 0929-1199 |
DOI: | 10.1016/S0929-1199(03)00045-2 |
Keywords: | equity offerings; market volatility; underwriting; underpricing |
Source: | Web of Science |
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