Market Timing of Corporate Security Issues

Posted: 6 Sep 1999

See all articles by Rajiv Sant

Rajiv Sant

Minnesota State University, Mankato - College of Business

Stephen Wilcox

Minnesota State University, Mankato

Date Written: November 1994

Abstract

In this study we investigate the timing of equity and debt issues by corporations in the United States relative to changes in the stock market, interest rates, and other economic activity. Our results are based on the multi- variate cross-sectional time series analysis of aggregate capital market activity using ARIMA and VAR econometric models. We find that the proportion of total as well as "seasoned" equity issuance increases following an increase in the stock market. However, the proportion of "unseasoned" equity issues, i.e., Initial Public Offerings is unaffected by stock market changes in the short run. We also find that the proportion of underwritten equity issues increases following an increase in stock prices, but is unaffected by changes in stock market volatility. It also appears that corporations prefer to issue convertible bonds following an increase in stock prices. We also present evidence indicating that the proportion of warrants issued increases and that the proportion of debt issued decreases following an increase in interest rates.

JEL Classification: G32

Suggested Citation

Sant, Rajiv and Wilcox, Stephen, Market Timing of Corporate Security Issues (November 1994). Available at SSRN: https://ssrn.com/abstract=5968

Rajiv Sant (Contact Author)

Minnesota State University, Mankato - College of Business ( email )

150 Morris Hall
MH248
Mankato, MN 56001
507-389-1826 (Phone)
507-389-5497 (Fax)

Stephen Wilcox

Minnesota State University, Mankato ( email )

228 Wiecking Center
Mankato, MN 56001
United States
(507) 389-6531 (Phone)

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