|Book Group Author:||NA|
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.
|Journal:||JOURNAL OF CORPORATE FINANCE|
|Journal ISO:||J. Corp. Financ.|
|Publisher:||ELSEVIER SCIENCE BV|
equity offerings; market volatility; underwriting; underpricing
|Source:||Web of Science|