Debt Issuance under Rule 144A and Equity Valuation Effects (ABSTRACT)
Carayannopoulos, Peter and Nayak, Subhankar
published: 2012 | Research publication | Refereed Journals - Finance
Carayannopoulos, P and Nayak, S. (2012). "Debt Issuance under Rule 144A and Equity Valuation Effects". Review of Pacific Basin Financial Markets and Policies, Forthcoming.
We compare valuation effects associated with debt issuance under SEC Rule 144A versus issuance in the public market. We find that non-convertible debt Rule 144A issuers experience an incremental positive announcement effect when compared to their counterparts issuing in the public market. We attribute this to the timing of issuance under favorable market conditions and a reduction in informational assymetry due to lender specialization. When compared to their public counterparts, convertible Rule 144A bond issuers often experience negative announcement effects and iferior post-issuance stock performance. We argue that this negative market reaction arises from a stronger opportunistic market-timing signal.
revised Sep 24/12
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