This paper reviews the theory and evidence on the process by which corporations raise debt and equity capital and the associated effects on security prices. Findings from related transactions are used to test hypotheses about the stock price patterns accompanying announcements of security offerings. Various contractual alternatives employed in security issues are examined; for example, rights or underwritten offers, negotiated or competitive bid, best efforts or firm commitment contracts, and shelf or traditional registration. Finally, incentives for underpricing new issues are analyzed.

We examine an unusual sample of firms within the life insurance industry: 30 firms which switched from a common-stock to a mutual-ownership structure. Our evidence indicates that the rate of growth of premium income from policyholders remains unchanged, stockholders receive a premium for their stock, and management turnover declines; thus, no group of claimholders systematically loses in the sample of firms which choose to go through the mutualization process. We therefore conclude that for this sample of firms, changing from a stock to a mutual-ownership structure is on average efficiency-enhancing.