Estimation bias induced by discrete security prices. Capital structure theory and REIT security offerings. Security pricing and deviations from the absolute priority rule in bankruptcy proceedings
In this paper, we examine the stock price reactions to announcements of new security offerings by Real Estate Investment Trusts (REITs). REITs offer a unique setting in which to study these events because they do not pay taxes at the firm level. Theory suggests that the net tax gain to corporate borrowing is unambiguously negative for a REIT. Contrary to some recent studies, however, we find a positive stock price reaction to debt offerings, while the negative equity-issuance effect is preserved. Further empirical evidence lends support to signalling as the explanation for the positive significant debt-issuance effect. (Reprinted by permission of the publisher.)
Author: Howe, John S., Shilling, James D.
Securities, Securities prices, Real estate investment trusts
Security pricing and deviations from the absolute priority rule in bankruptcy proceedings
Claims ultimately awarded to shareholders of firms in reorganization were examined for a sample of 30 filings under the 1978 Bankruptcy Reform Act. We measured the amount paid to shareholders in excess of that which they would have received under the absolute priority rule and found that this amount represents, on average, 7.6% of the total awarded to all claimants. Evidence is also reported that common share values reflect a significant proportion of value ultimately received in violation of absolute priority, suggesting that deviations from the rule were expected by the equity markets. (Reprinted by permission of the publisher.)
Author: Moore, William T., Eberhart, Allan C., Roenfeldt, Rodney L.
Management, Stocks, Stock prices, Bankruptcy
Subjects list: Analysis, Prices and rates, Financial research
Abstracts: Information asymmetries and security market design: an empirical study of the secondary market for U.S. government securities
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