ABSTRACT
In this chapter, the author addresses the same problem anew, namely, whether new issues of stock by an existing firm depresses its stock price after the announcement date, and thus results in negative returns to its stockholders. There are three main contributions of our analysis. First, the author has collected data from 1990 to1997 when the stock market was quite bullish. Second, the author have divided our data set into stocks, which were listed in the New York Stock Exchange and in the over-the-counter market, in order to examine whether the returns were significantly different because of firms belonging to these two separate markets. Finally, the author have also divided the 1990-1997 time period into two sub-periods—1990 to 1993 when the stock market was mildly bullish and 1994-1997 when the market was highly bullish. The comparison period approach was used very successfully by Brown and Warner to compute abnormal returns.
