The Intra-Industry Transfer of Information Inferred from Announcements of Corporate Security Offerings



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    • Drexel University. This paper is based on my Ph.D. dissertation at The Pennsylvania State University. I benefitted from the suggestions and comments of my dissertation committee: John R. Ezzell (chairman), James A. Miles (advisor), Ronald S. Koot, and John Fender. Helpful comments were received from Thomas Chiang, Thomas Hindelang, Robert Liebler, René M. Stulz, George Tsetsekos, Raj Varma, an anonymous referee, and seminar participants at Bowling Green University, University of Delaware, DePaul University, Drexel University, Lehigh University, University of Notre Dame, University of Rhode Island, Rider College, Rochester Institute of Technology, and Temple University. I am solely responsible for any remaining errors.


This study investigates the extent to which information inferred by investors from initial announcements of corporate security offerings affects share prices in the capital markets. The empirical tests measure the response in the common stock prices of both firms announcing a security offering and non-announcing firms operating in the same industry. Small but significantly negative abnormal returns are shown by industry shares upon initial announcements of common stock, convertible debt, and straight debt public offerings. Such an industry response indicates that share prices incorporate an inside assessment of factors relevant to the valuation of an industry subset of firms.