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Common Stock Offerings and Earnings Expectations: A Test of the Release of Unfavorable Information

Common Stock Offerings and Earnings Expectations: A Test of the Release of Unfavorable Information ABSTRACT This paper examines the revisions of analysts' forecasts of future earnings around announcements of common stock offerings. The forecasts of the current year earnings are, on average, decreased when firms announce plans to issue additional common stock. The size of the decrease is significantly related to announcement period abnormal stock returns. In contrast, forecasts of the five‐year growth rate of earnings are, on average, unchanged. We interpret these results as being consistent with the claim that equity offering announcements convey unfavorable information regarding the firm's short‐term but not its long‐term earnings prospects. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Common Stock Offerings and Earnings Expectations: A Test of the Release of Unfavorable Information

The Journal of Finance , Volume 47 (4) – Sep 1, 1992

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References (27)

Publisher
Wiley
Copyright
1992 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1992.tb04668.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper examines the revisions of analysts' forecasts of future earnings around announcements of common stock offerings. The forecasts of the current year earnings are, on average, decreased when firms announce plans to issue additional common stock. The size of the decrease is significantly related to announcement period abnormal stock returns. In contrast, forecasts of the five‐year growth rate of earnings are, on average, unchanged. We interpret these results as being consistent with the claim that equity offering announcements convey unfavorable information regarding the firm's short‐term but not its long‐term earnings prospects.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1992

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