Does market microstructure matter for corporate finance? Theory and evidence on seasoned equity offering decisions

Ming Yan William Cheung, Scott Fung, Lewis Tam

研究成果: Article

2 引用 (Scopus)


This study presents a theoretical model and empirical analysis to examine how market microstructure affects Seasoned Equity Offering (SEO) decisions from the perspective of information production associated with market liquidity. We present two sets of new findings. First, the market illiquidity of a firm's stock (measured by price impact and bid-ask spread) has a significantly negative impact on the probability of SEO, as well as on the size of the offering. A decrease of the pre-issue price impact by one standard deviation is associated with an increase of normalized SEO proceeds of 9.7%. The impact of market illiquidity is larger when pre-SEO price is less informative. Second, SEO decision predicts a more informative stock price. Our results are robust to alternative measures of market liquidity, price informativeness and SEO.

ジャーナルQuarterly Review of Economics and Finance
出版物ステータスPublished - 2016 5 1


ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics