Corporate earnings and financings: An analysis of cancelled versus completed offerings

Testing the earnings downturn and overvaluation hypotheses, a study examines the long-term behavior of earnings around cancelled offers of firm financings of straight debt, convertible debt, and common stock. Although the study finds evidence consistent with both hypotheses in the completed offering...

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Bibliographic Details
Published inJournal of applied business research Vol. 11; no. 1; p. 46
Main Authors Crutchley, Claire E, Hudson, Carl D, Jensen, Marlin R H
Format Journal Article
LanguageEnglish
Published Laramie The Clute Institute 01.12.1994
Subjects
Convertible bonds
Corporate profits
Debt financing
Equity
Hypotheses
Impacts
Investments
Rates of return
Regression analysis
Stock offerings
Stockholders
Studies
Valuation
United States > US
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Summary:Testing the earnings downturn and overvaluation hypotheses, a study examines the long-term behavior of earnings around cancelled offers of firm financings of straight debt, convertible debt, and common stock. Although the study finds evidence consistent with both hypotheses in the completed offerings, the earnings pattern around cancelled offerings is consistent with overvaluation rather than earnings downturn. The results show an unexpected earnings drop following the cancellation; however, no evidence that shareholders correctly anticipate the size of the earnings downturn is found.
ISSN:0892-7626
2157-8834