Impacts of New Equity Sales upon Electric Utility Share Prices

Share Price Reaction To Security Offerings By Hospitality Firms

“…The sample aggregate announcement period (days t_3 to to) cumulative abnormal return is about -2.2%, which is statistically significant at the 0.05 level. Market reactions that are spread over several days surrounding the announcement date are not unusual, as Pettway and Radcliffe (1985) and others found that the majority of the share price decline occurs during three days surrounding the announcement date. Perhaps this is due to different rates of information dissemination across different announcement situations.…”

“…Cumulative daily abnormal returns over several surrounding time intervals are also examined including: days t-3 to to, days t_1o to t_1, and days t+1 to t+1o. Asquith and Mullins (1986) Slovin, and Sushka (1989), and Pettway and Radcliffe (1985) and many others also examine abnormal and cumulative abnormal returns over similar windows of time. The abnormal return for firm j on day t is: A A where and Bj are the ordinary least squares estimates of the intercept and slope coefficients, respectively, derived from the market model.…”

“…This increasingly prevalent approach to investment is being manifested by the rapid growth and popularity of mutual funds that focus on specific industry sectors, such as health care, technology, and others. Because investors may react differently across different industry sectors, other researchers have examined the share price reactions to security offerings in avariety of industries, including banking (Polonchek, Slovin, & Sushka, 1989), insurance (Akhigbe, Borde, & Madura, 1997), and public utilities (Asquith & Mullins, 1986;Masulis & Korwar, 1986;Pettway & Radcliffe, 1985). The results of these studies indicate that the market reacts quite differently across these different industry sectors.…”

A role for preferred stock in the financing decision of a public utility

“…New common stock, of course, represents a combination of new issues and retained earnings. Public utilities are in the market issuing new common stock every year, and, from the studies by Asquith and Mullins (1986) and Pettway and Radcliffe (1985), we know that the number of new common stock issues Recall that ~kl the model results for the condition E(et) > 0 and ~t = 0 depend on 3--S-~1' the effect of a change in capital structure on the required rate of return for common stock. One can argue that the high market-to-book ratios of the 1960's were the result ofE(et) > 0 not ~t > 0, and if ~ is a weak effect, then the incentive for the firm to go all common stock financing OLXt~O ' 1 is also weak.…”

Valuation Effects of New Securities Issuance by Bank Holding Companies: New Evidence

“…Studies concerning the effect of primary equity offerings for public utility firms report similar, but less pronounced, share price effects than industrial companies. Masulis and Korwar [121, Pettway and Radcliffe [18], and Asquith and Mullins [21 attribute such differences to the security issuance procedures inherent to public utility firms. The financing and investment plans of these firms are commonly made available to the public on a regular basis.…”