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Analyst coverage and financing decisions

journal contribution
posted on 2006-12-01, 00:00 authored by Xin Chang, S Dasgupta, G Hilary
We provide evidence that analyst coverage affects security issuance. First, firms covered by fewer analysts are less likely to issue equity as opposed to debt. They issue equity less frequently, but when they do so, it is in larger amounts. Moreover, these firms depend more on favorable market conditions for their equity issuance decisions. Finally, debt ratios of less covered firms are more affected by Baker and Wurgler’s
(2002) “external finance-weighted” average market-to-book ratio. These results are consistent with market timing behavior associated with information asymmetry, as well as behavior implied by dynamic adverse selection models of equity issuance.

History

Journal

The journal of finance

Volume

61

Issue

6

Pagination

3009 - 3048

Publisher

Wiley

Location

London, Eng.

ISSN

0022-1082

Language

eng

Publication classification

C Journal article; C1.1 Refereed article in a scholarly journal

Copyright notice

2006, Wiley

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