The effects of removing barriers to equity issuance

Gustafson, Matthew; Iliev, Peter

doi:10.1016/j.jfineco.2017.03.008

Cited by 74 publications

(62 citation statements)

References 52 publications

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“…The different issuance mechanisms present an equity capital raising landscape that is more complete than before the new regulations and particularly offers additional equity raising opportunities to smaller firms. Gustafson and Iliev (2017) note this increase in opportunities, and our evidence is complementary to theirs. We offer evidence in Panel A of Table 2.…”

Section: B Market Differencessupporting

confidence: 78%

“…The 2008 amendments to Form S-3 increased access to shelf registration for smaller firms, which also encouraged ATMs. Our research adds to the literature on the importance of regulation for capital acquisition (e.g., Gustafson and Iliev (2017)).…”

Section: Introductionmentioning

confidence: 91%

“…For large firms, issuance size limitations (when pulling shares off the shelf) were the likely deterrents to ATMs and were a specific concern noted by the SEC. For small firms, defined as those firms with less than $75 million in public float, issuing shares off the shelf (and, hence, ATMs) was specifically prohibited (Gustafson and Iliev (2017)).…”

Section: Regulatory Reformmentioning

confidence: 99%

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At-the-Market Offerings

Billett¹,

Floros²,

Garfinkel³

2018

J. Financ. Quant. Anal.

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We study at-the-market (ATM) equity offerings, which are direct share issuances sold in the secondary market that forgo underwriters and “dribble-out” shares over time rather than raising them all at once. Enabled in 2008, their use has increased dramatically, and in 2016, their incidence and total proceeds were, respectively, 63% and 26% of those for seasoned equity offerings (SEOs). Determinants of firms’ choice between ATMs and SEOs are consistent with the costly certification hypothesis of Chemmanur and Fulghieri (1994). We also find that 65% of ATM proceeds are used to stockpile cash compared to 84% of SEO proceeds.

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Section: B Market Differencessupporting

confidence: 78%

Section: Introductionmentioning

confidence: 91%

Section: Regulatory Reformmentioning

confidence: 99%

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At-the-Market Offerings

Billett¹,

Floros²,

Garfinkel³

2018

J. Financ. Quant. Anal.

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“…PIPEs are more common among smaller issuers, so our sample of equity issuers is tilted towards smaller firms relative to the DDS issuers. Gustafson and Iliev (2017) document that PIPEs have become less common following a 2008 S.E.C. regulatory change allowing small reporting companies (those with a public float of less than $75 million) to conduct shelf registrations.…”

Section: Summary Statistics and Univariate Sortsmentioning

confidence: 99%

Corporate Cash Shortfalls and Financing Decisions

Huang

Ritter

2020

The Review of Financial Studies

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Given their actual revenue and spending, most net equity issuers and an overwhelming majority of net debt issuers would face immediate cash depletion without external financing. Debt issuers tend to have short-lived cash needs, while equity issuers often have persistent cash needs. On average, debt issuers immediately spend almost all of the proceeds, while equity issuers retain much of the proceeds in cash. Anticipated near-future cash needs and fixed costs of financing help explain the fraction of the proceeds being retained. Our findings support a funding-horizon theory in which cash needs and the nature of cash needs motivate financing decisions.

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“…In further analysis, I expand the regressor set of Butler, Grullon, and Weston (2005) to include covariates identified in the literature examining SEOs. For example, Gao and Ritter (2010) and Gustafson and Iliev (2017) suggest that firms may use accelerated bookbuilding to reduce their cost of issuance. To the extent that accelerated issues are used more frequently by firms conditional on the presence of a credit rating, this decision may confound the association between credit ratings and investment bank fees.…”

Section: Panel Analysis Empirical Resultsmentioning

confidence: 99%

Credit Ratings and the Cost of Issuing Seasoned Equity

McBrayer

2019

J of Financial Research

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I examine the effects of issuer credit ratings on the costs associated with seasoned equity offerings (SEOs). The evidence from a panel of SEOs from 1990 to 2014 shows that when firms issue seasoned equity, those with issuer credit ratings pay reduced investment banking fees. I confirm these results by conducting a propensity‐score matched‐sample comparison analysis of firms that obtain new, long‐term issuer credit ratings with an unrated control group. Controlling for known determinants of SEO fees, I find that firms that obtain a new credit rating before issuing seasoned equity pay significantly reduced investment banking fees. In economic terms, underwriting fees for newly rated firms are 7.2% lower than those for similar, yet unrated firms. Finally, I examine the indirect costs of issuance and find evidence that credit‐rated firms face reduced market‐based costs to issue. Rated firms incur lower dilutionary costs to issue and have more positive abnormal returns surrounding the issue.

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The effects of removing barriers to equity issuance

Cited by 74 publications

References 52 publications

At-the-Market Offerings

At-the-Market Offerings

Corporate Cash Shortfalls and Financing Decisions

Credit Ratings and the Cost of Issuing Seasoned Equity

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