Working Paper: NBER ID: w4908
Authors: Junkoo Kang; Ren M. Stulz
Abstract: This paper studies the shareholder wealth effects associated with 875 new security issues in Japan from January 1, 1985 to May 31, 1991. The sample includes public equity, private equity, rights offerings, straight debt, warrant debt and convertible debt issues. Contrary to the U.S., the announcement of convertible debt issues is accompanied by a significant positive abnormal return of 1.05%. The announcement of equity issues has a positive abnormal return of 0.45%, significant at the 0.10 level, but this positive abnormal return can be attributed to one year in our sample and is offset by a negative issue date abnormal return of -1.01%. The abnormal returns are negatively related to firm size, so that for equity issues (but not for convertible debt issues), large Japanese firms have significant negative announcement abnormal returns. Our evidence is consistent with the view that Japanese managers decide to issue shares based on different considerations than American managers.
Keywords: Corporate Finance; Security Issues; Shareholder Wealth Effects; Japan; Convertible Debt
JEL Codes: G32; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| announcement of convertible debt issues (G24) | significant positive abnormal return (G14) |
| announcement of equity issues (G12) | positive abnormal return (G17) |
| announcement of equity issues (G12) | negative issue date abnormal return (G14) |
| firm size (L25) | abnormal returns (G14) |
| announcement of equity issues (G12) | negative announcement abnormal returns (larger firms) (G14) |