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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Long‐Run Performance following Private Placements of Equity
Published: 12/17/2002 | DOI: 10.1111/1540-6261.00507
Michael Hertzel, Michael Lemmon, James S. Linck, Lynn Rees
Public firms that place equity privately experience positive announcements effects, with negative post‐announcement stock‐price performance. This finding is inconsistent with the underreaction hypothesis. Instead, it suggests that investors are overoptimistic about the prospects of firms issuing equity, regardless of the method of issuance. Further, in contrast to public offerings, private issues follow periods of relatively poor operating performance. Thus, investor overoptimism at the time of private issues is not due to the behavioral tendency to overweight recent experience at the expense of long‐term averages.