Stock returns around security offering announcements are conditional on firms' selfselection into a particular security type. We use a switching regression methodology on a data set of U.S. straight debt, convertible debt, and seasoned equity offerings to estimate counterfactual announcement returns that would be obtained had the same firms instead opted for alternative financing. Our evidence is consistent with firms choosing the financing type with the least negative expected announcement effect. Our results justify some observed pecking order behavior patterns better than do actual announcement effects, yet also suggest that for some firms equity-like financing may be preferred to debt-like financing.
Dutordoir, Marie, and Laurie Simon Hodrick. "Self-Selection and Stock Returns Around Corporate Security Offering Announcements." Working paper, Columbia Business School, November 2012.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.