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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Understanding stock price behavior around external financing
AU - Cao, Min
AU - Martin, Spencer
AU - Yao, Chelsea
PY - 2025/4/30
Y1 - 2025/4/30
N2 - The negative association between pre-financing price run-ups and post-financing price drift-downs is well documented in the literature. We find that firms experiencing pre-financing run-ups and firms experiencing post-financing long-term underperformance may not always be the same firms. The firms with high levels of cash flows experience pre-financing price run-ups but do not suffer post-financing price drift-downs. On the other hand, firms with low cash flow levels do not have pre-financing price run-ups but experience post-financing long-term underperformance even after controlling for various well-documented anomalies. Profitability analyses around external financing suggest that high-cash-flow firms' pre-financing price run-ups could be driven by their robust profitability, whereas low-cash-flow firms' post-financing underperformance might be attributable to their losses.
AB - The negative association between pre-financing price run-ups and post-financing price drift-downs is well documented in the literature. We find that firms experiencing pre-financing run-ups and firms experiencing post-financing long-term underperformance may not always be the same firms. The firms with high levels of cash flows experience pre-financing price run-ups but do not suffer post-financing price drift-downs. On the other hand, firms with low cash flow levels do not have pre-financing price run-ups but experience post-financing long-term underperformance even after controlling for various well-documented anomalies. Profitability analyses around external financing suggest that high-cash-flow firms' pre-financing price run-ups could be driven by their robust profitability, whereas low-cash-flow firms' post-financing underperformance might be attributable to their losses.
U2 - 10.1016/j.jcorpfin.2024.102730
DO - 10.1016/j.jcorpfin.2024.102730
M3 - Journal article
VL - 91
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
M1 - 102730
ER -