The timing of corporate event waves
P. Raghavendra Rau and Aris Stouraitis
Purdue University and City University of Hong Kong
Corporate events happen in waves. In this paper, we examine the timing patterns of five different types of corporate event waves (new stock and seasoned equity issues, stock and cash-financed acquisitions, and stock repurchases) using a comprehensive dataset of more than 151,000 corporate transactions over the 25-year period 1980-2004. We document a distinctive pattern, previously undocumented in the literature, in the way waves form. Corporate waves seem to start with new issue waves (SEO preceding IPO waves), followed by merger (both stock and cash-financed) waves, followed in turn by repurchase waves. Our results hold over separate decades and across industries. Overall, our results suggest that corporate event waves begin with strong fundamentals and managers and investors end up over-reacting to these fundamentals as the waves progress.
It has been presented at
- Financial Management Association European Meetings, Stockholm 2006
- Frontiers of Finance conference, Curacao 2007
- City University of Hong Kong
- McGill University
- Queen’s University
- University of Alberta
- UCLA
- UC Davis
- UC Irvine
- USC
- Vanderbilt Law School
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