Positive information from equity issue announcements

“Pecking order” of Chinese capital market: Effects of convertible bonds’ issue announcements

“…High uncertain net present value (NPV) indicates that the firm value is underpriced, thus financing will result in positive market reaction. The coefficient of issue size/MVCS is negative, which is inconsistent with Cooney and Kalay (1993). This means issue size is negatively related to the market reaction.…”

Understanding the Positive Announcement Effects of Private Equity Placements: New Insights from Hong Kong Data

“…While a positive SEO announcement effect appears to be inconsistent with the separating equilibrium of Myers and Majluf (1984), papers that generalize the Myers-Majluf model such as Cooney and Kalay (1993), Wu and Wang (2005) and Eckbo and Norli (2005a) do imply a positive announcement effect in certain circumstances. For example, Wu and Wang (2005) suggest that a positive SEO announcement effect occurs when the adverse selection effect, primarily arising from asymmetric information about assets in place, is overwhelmed by the positive information effect from asymmetric information about corporate growth opportunities -a situation virtually ruled out in Myers and Majluf (1984).…”

“…where R it is daily return on issuing firm i, R mt is daily value-weighted market return, SMB (Cooney and Kalay, 1993;Wu and Wang, 2005;Eckbo and Norli, 2005a). For example, Wu and Wang (2005) predict that positive announcement effects are more likely to occur if the asymmetric information arises more from investment opportunities than from assets in place (see also Ambarish, John and Williams, 1987, in a non-Myers-Majluf context).…”

Does competition from new equity mitigate bank rent extraction? Insights from Japanese data

“…While Myers and Majluf (1984) focus mainly on the adverse selection effect from dominant asymmetric information about assets-in-place, the generalized MyersMajluf model of Cooney and Kalay (1993) and predicts that dominant asymmetric information about growth opportunities can actually facilitate new equity issuance. By assuming that managers on behalf of existing shareholders launch only non-negative NPV new projects, Myers and Majluf (1984) limit the information gap regarding growth.…”

“…This paper, however, finds funding competition from new equity to be a natural mechanism for high growth firms to restrain bank rent extraction. According to the generalized Myers-Majluf model developed by Cooney and Kalay (1993) and , asymmetric information about firm valuations that derive largely from growth opportunities does not inhibit but rather helps facilitate new equity issues. As a result, to curb bank rent extraction, the main competition from external finance can rely upon either public debt or new equity, and the external finance patterns depend on firm growth status or type.…”