Bhagat is Assistant Professor of Finance, University of Utah. Marr is Assistant Professor of Finance, Virginia Polytechnic Institute and State University. He is currently on leave as Visiting Scholar, Office of the Chief Economist, Securities and Exchange Commission, Washington, D.C. Thompson is Associate Professor of Finance, Virginia Polytechnic Institute and State University. We thank James Brickley, Charles Cox, Frank Easterbrook, John Finnerty, Peter Frost, Prem Jain, Gregg Jarrell, David Kidwell, Ron Lease, Wayne Lee, Robert Rogowski, and two anonymous referees of this Journal for their helpful comments on an earlier draft of this paper. The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the authors and do not necessarily reflect the views of the Commission or of the author's colleagues upon the staff of the Commission.
The Rule 415 Experiment: Equity Markets
Article first published online: 30 APR 2012
1985 The American Finance Association
The Journal of Finance
Volume 40, Issue 5, pages 1385–1401, December 1985
How to Cite
BHAGAT, S., MARR, M. W. and THOMPSON, G. R. (1985), The Rule 415 Experiment: Equity Markets. The Journal of Finance, 40: 1385–1401. doi: 10.1111/j.1540-6261.1985.tb02390.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
Rule 415 allows a firm to register all the securities it reasonably expects to sell over the next two years and then, at the management's option, to sell those securities over these two years whenever it chooses. This paper examines whether equity offerings made under Rule 415 (shelf offerings) differ in issuing costs from equity offerings not sold under this rule. We find that shelf offerings cost 13% less for syndicated issues and 51% less for nonsyndicated issues. We also investigate the empirical relevance of the market overhang argument which suggests that shelf registrations depress the price of the registering firm's shares more than traditional registrations. Our data does not support the market overhang argument.