Capital inflows, equity issuance activity, and corporate investment

Capital inflows and investment in developing countries

Countercyclical Bank Equity Issuance∗

It is well established that equity issuance for most non-financial firms is procyclical. This paper shows that, in contrast, equity issuance for banks is countercyclical across credit cycles after 1980, as is retained income. Thus, during credit booms, banks raise less equity, even though more equity might help banks better absorb shocks. This paper shows that government guarantees play a cruci...

Relationship between Cost of Equity Capital And Voluntary Corporate Disclosures

The relationship between disclosure and cost of equity capital has always been interesting not only for managers, but for investors as well. Economic theory suggests that by increasing the level of corporate reporting firms not only increase their stock market liquidity, but they also decrease the investors’ estimation risk, arising from uncertainty about future returns and payout distributions...

Capital Market Imperfections, High-Tech Investment, and New Equity Financing*

Highly variable returns, asymmetric information and a lack of collateral should cause small high-tech firms to have poor access to debt. New equity financing has several advantages over debt, but may be costly compared to internal finance. We examine an unbalanced panel of over 2,400 publicly traded United States high-tech companies over the period 1981 to 1998. Most small high-tech firms obtai...

Institutional Ownership, Cost of Capital, and Corporate Investment

Neoclassical models postulate that firms’ investment is determined by expected profitability and the cost of capital. Capital market imperfections, caused by information asymmetries and agency costs, lead to a modified investment scenario, where the external cost of capital is higher than the cost of internal funds. This, in turn, leads to the well-known result of underinvestment by firms. We h...