Earnings and Risk Changes Surrounding Primary Stock Offers
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Abstract
Several recent studies, including Asquith and Mullins [1986], Masulis and Korwar [1986], Mikkleson and Partch [1986], and Schipper and Smith [1986], document stock price declines at seasoned equity offer announcements. One explanation proposed for these price declines is that managers' equity offer decisions convey new information to investors on firms' prospects.1 Our paper examines this hypothesis and provides evidence on the nature of the information revealed by equity offers by analyzing postoffer changes in asset and equity betas, financial leverage, unsystematic risk, earnings levels, and analysts' earnings forecasts.