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Liquidity Changes around Seasoned Equity Issuance: Public Offerings versus Private Placements


  • This paper is based on a chapter of my dissertation at Pennsylvania State University. I am very grateful to my dissertation committee members: Herman Bierens, Laura Field, Michelle Lowry, and Dennis Sheehan (Chair). I also appreciate valuable comments from Dalia Marciukaityte, John Schatzberg, Holland Toles, John Wald, and especially many constructive suggestions from two anonymous referees. I have also benefited from helpful comments by participants at the meetings of Eastern Finance Association, Financial Management Association, and Midwestern Finance Association. Special thanks go to I/B/E/S for generously providing analyst data, and Ronnie Sadka for his help on constructing the price impact measures. All errors are my own.

Corresponding author: School of Business Administration, Department of Accounting and Finance, 347 Elliott Hall, Oakland University, Rochester, MI 48309; Phone: (248)370-3509; Fax: (248)370-4275; E-mail:


I investigate whether firms that issue equity, in public offerings or private placements, have improved on liquidity in the secondary market. Transaction costs, price impacts, and trading activity are examined. Results show that public offering stocks become considerably more liquid in all three dimensions. For private placement stocks, there is some evidence that trading volume increases, but effective spread and temporary price impact decline less than market-wide changes. Furthermore, I study the behaviors of participants in the newly issued equity market. Analyses indicate that underwriters, analysts, and market makers all contribute to liquidity changes, but in different aspects.