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Does market microstructure matter for corporate finance? Theory and evidence on seasoned equity offering decisions
Cheung,William1; Fung,Scott2; Tam,Lewis1
2016-05-01
Source PublicationQuarterly Review of Economics and Finance
ISSN10629769
Volume60Pages:149-161
Abstract

This study presents a theoretical model and empirical analysis to examine how market microstructure affects Seasoned Equity Offering (SEO) decisions from the perspective of information production associated with market liquidity. We present two sets of new findings. First, the market illiquidity of a firm's stock (measured by price impact and bid-ask spread) has a significantly negative impact on the probability of SEO, as well as on the size of the offering. A decrease of the pre-issue price impact by one standard deviation is associated with an increase of normalized SEO proceeds of 9.7%. The impact of market illiquidity is larger when pre-SEO price is less informative. Second, SEO decision predicts a more informative stock price. Our results are robust to alternative measures of market liquidity, price informativeness and SEO.

KeywordCorporate Financing Decision Market Liquidity Market Microstructure
DOI10.1016/j.qref.2015.06.003
URLView the original
Language英语
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Document TypeJournal article
CollectionDEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorCheung,William
Affiliation1.Department of Finance and Business Economics,Faculty of Business Administration,University of Macau,,Macao
2.Department of Accounting and Finance,College of Business and Economics,California State University,,East Bay,United States
First Author AffilicationFaculty of Business Administration
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Cheung,William,Fung,Scott,Tam,Lewis. Does market microstructure matter for corporate finance? Theory and evidence on seasoned equity offering decisions[J]. Quarterly Review of Economics and Finance,2016,60:149-161.
APA Cheung,William,Fung,Scott,&Tam,Lewis.(2016).Does market microstructure matter for corporate finance? Theory and evidence on seasoned equity offering decisions.Quarterly Review of Economics and Finance,60,149-161.
MLA Cheung,William,et al."Does market microstructure matter for corporate finance? Theory and evidence on seasoned equity offering decisions".Quarterly Review of Economics and Finance 60(2016):149-161.
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