Why are firms that raise more financing worth more?

I study the financing decisions of firms going public. I find that, all else equal, firms that raise more financing are worth more, and I consider potential explanations for this finding. I provide evidence that raising more financing leads to greater investor recognition, as proxied by better underwriting services, greater liquidity, and greater investor interest, and thereby increases firm value. Additionally, I find some evidence that supports the fixed costs of raising financing explanation but no evidence that supports the market timing explanation. The results do not appear to be driven by investment opportunities or firm quality. First version: April 2007 This version: March 11, 2008 JEL classifications: G32 (Financing Policy; Capital and Ownership Structure)