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| Author: | Karim, K. E. |
| Title: | An Empirical Examination of the Pricing of Seasoned Equity Offerings: A Test of the Signaling Hypothesis |
| Journal: | Review of Quantitative Finance and Accounting
2001 : JUL, VOL. 17:1, p. 63-80 |
| Index terms: | FINANCE PRICING EMPIRICAL RESEARCH ANALYTICAL REVIEW |
| Language: | eng |
| Abstract: | This paper tests the predictions made by Signaling Theory against the competing Price-Irrelevance Hypothesis. Signaling Theory suggests that the issue price of a security provides a signal of quality of the issuing firm. In contrast, the Price-Irrelevance Hypothesis suggests that equity pricing does not possess information content. This paper investigates the pricing of seasoned equity offerings by examining the role of firm quality and relative firm valuation on issue price discounts. Additionally, this paper investigates the relationship between the issue price discount and the market reaction at the issuance of seasoned equity offerings. The results indicate that firm quality does not have a significant impact on the degree of price discounting by the issuing firm. |
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