Signaling and the Valuation of Unseasoned New Issues

Signaling and the Valuation of Unseasoned New Issues ABSTRACT This paper is an empirical examination of the relation between firm value and two potential actions by entrepreneurs attempting to signal to investors information about otherwise unobservable firm features. The signals investigated are the proportion of equity ownership retained by entrepreneurs and the dividend policy of the firm; both signals are hypothesized to be positively related to firm value. Using a sample of unseasoned new equity issues, the empirical results are consistent with the entrepreneurial ownership retention hypothesis, but the dividend signaling hypothesis is rejected. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Signaling and the Valuation of Unseasoned New Issues

The Journal of Finance, Volume 37 (1) – Mar 1, 1982

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Publisher
Wiley
Copyright
1982 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1982.tb01091.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper is an empirical examination of the relation between firm value and two potential actions by entrepreneurs attempting to signal to investors information about otherwise unobservable firm features. The signals investigated are the proportion of equity ownership retained by entrepreneurs and the dividend policy of the firm; both signals are hypothesized to be positively related to firm value. Using a sample of unseasoned new equity issues, the empirical results are consistent with the entrepreneurial ownership retention hypothesis, but the dividend signaling hypothesis is rejected.

Journal

The Journal of FinanceWiley

Published: Mar 1, 1982

References

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