The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Do Firms Knowingly Sell Overvalued Equity?
Published: 04/18/2012 | DOI: 10.1111/j.1540-6261.1997.tb01116.x
INMOO LEE
This article examines the relation between top executives' trading and the long‐run stock returns of seasoned equity issuing firms. Primary issuers, who sell mostly newly‐issued primary shares, significantly underperform their benchmarks, regardless of the top executives' prior trading pattern. However, top executives' trading is reliably associated with the stock returns of secondary issuers, who sell mostly secondary shares previously held by existing shareholders. On average, secondary issuers do not underperform their benchmarks. The results suggest that increased free cash flow problems after issue play an important role in explaining the underperformance of issuing firms.
Business Groups and Tunneling: Evidence from Private Securities Offerings by Korean Chaebols
Published: 09/19/2006 | DOI: 10.1111/j.1540-6261.2006.01062.x
JAE‐SEUNG BAEK, JUN‐KOO KANG, INMOO LEE
We examine whether equity‐linked private securities offerings are used as a mechanism for tunneling among firms that belong to a Korean chaebol. We find that chaebol issuers involved in intragroup deals set the offering prices to benefit their controlling shareholders. We also find that chaebol issuers (member acquirers) realize an 8.8% (5.8%) higher (lower) announcement return than do other types of issuers (acquirers) if they sell private securities at a premium to other member firms, and if the controlling shareholders receive positive net gains from equity ownership in issuers and acquirers. These results are consistent with tunneling within business groups.