An Investigation of Preferred Stock Financing by Bank and Nonbank Financial Institutions

J. OF FINANCIAL RESEARCH

Posted: 26 Nov 1996

See all articles by Paige Fields

Paige Fields

University of Kansas

Shelly E. Webb

Xavier University

Abstract

We investigate the shareholder wealth effects of announcements of preferred stock issues made by financial institutions. Fixed-rate straight preferred stock and convertible preferred stock issue announcements result in insignificant common share price responses. However, the average stock price reaction to announcements of adjustable-rate preferred stock issues is positive and significant for banking firms. Our findings suggest that banks' common shareholders react positively to adjustable- rate preferred stock issue announcements because such securities provide a relatively low cost means of increasing the primary capital used to satisfy legal minimum capital requirements without diluting common equity voting rights.

JEL Classification: G21, G34

Suggested Citation

Fields, Paige and Webb, Shelly E., An Investigation of Preferred Stock Financing by Bank and Nonbank Financial Institutions. J. OF FINANCIAL RESEARCH, Available at SSRN: https://ssrn.com/abstract=7936

Paige Fields (Contact Author)

University of Kansas ( email )

1654 Naismith Dr.
Lawrence, KS 66045
United States

Shelly E. Webb

Xavier University ( email )

Cincinnati, OH 45207
United States

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