This paper examines how market volatility affects corporate financing transactions. Firms face substantial uncertainty with respect to the price, demand, and after-market costs associated with raising public capital. The ability to effectively hedge this risk is critical to the efficient financing of firm capital needs. Using monthly US equity-related financing transactions from 1970 to 1998, I find that market volatility dampens financing transactions, particularly among small or unseasoned firms. Periods of above normal market volatility are associated with a significant 13% decline in the frequency of initial public offering (IPO) transactions and a 21% decline in the number of IPO dollars raised. Increased market volatility generates greater underwriting fees but does not affect IPO underpricing. The findings are most consistent with Mandelker and Raviv's [J. Finance 32 (1977) 683] model of costly distribution risk bearing.

[This paper tests whether foreign equity listings are associated with permanent valuation gains and examines how market and firm characteristics influence any valuation effects. Using a global sample of 1,676 listings placed in 25 countries, we find that much of the valuation gains to overseas listings are not permanent. The transitory nature of valuation gains holds for both average US listings and average first-time firm listings. We find little evidence of a permanent effect on returns for firms that list abroad, even for firms' listings in markets that are more liquid, provide better legal protection, or have a larger shareholder base.]

Using a cross section of effectively the entire universe of overseas listings across world markets, we examine the market preferences of firms listing their stock abroad. We find that geographic, economic, cultural, and industrial proximity play the dominant role in the choice of overseas listing venue. Contrary to the notion that firms maximize international portfolio diversification gains in listing abroad, cross-listing activity is more common across markets for which diversification gains are relatively low. Our findings imply that the same proximity constraints that are believed to lead to "home bias" in investment portfolio decisions also exert a profound influence on financing decisions.

Our paper re-examines the profitability of relative strength or momentum trading strategies (buying past strong performers and selling past weak performers). We find that standard relative strength strategies require frequent trading in disproportionately high cost securities such that trading costs prevent profitable strategy execution. In the cross-section, we find that those stocks that generate large momentum returns are precisely those stocks with high trading costs. We conclude that the magnitude of the abnormal returns associated with these trading strategies creates an illusion of profit opportunity when, in fact, none exists.

Using a 57-year global foreign listing sample, we identify cross-listing waves at the host market, home market, and industry levels. Waves in host markets are often due to cross-listing waves in proximate home markets. Consistent with gravity-model implications and economic-synergy arguments of cross-listing decisions, cross-listing waves in a given host country coincide with the outperformance of the host and proximate home countries’ economies and financial markets. The valuation gains from listings associated with cross-listing waves are transitory, supporting the market-timing component in these decisions. Our results provide novel evidence of nonmonotonic market development across countries and over time.

A growing literature finds that firm asset growth rates are negatively correlated with subsequent stock returns. We show that the poor post-deal returns that have been documented for stock acquisitions are more precisely explained by the return effects associated with systematically larger asset growth rates for stock deals. We find a similar result for other cross-sectional and time-series acquisition effects, including poor returns for glamour deals, weakly monitored deals, and deals done during high-valuation periods. We suggest that the distinguishing characteristic associated with poor performing acquisitions is simply their tendency to grow assets.

This paper tests whether foreign equity listings are associated with permanent valuation gains and examines how market and firm characteristics influence any valuation effects. Using a global sample of 1,676 listings placed in 25 countries, we find that much of the valuation gains to overseas listings are not permanent. The transitory nature of valuation gains holds for both average US listings and average first-time firm listings. We find little evidence of a permanent effect on returns for firms that list abroad, even for firms’ listings in markets that are more liquid, provide better legal protection, or have a larger shareholder base.

Using a cross section of effectively the entire universe of overseas listings across world markets, we examine the market preferences of firms listing their stock abroad. We find that geographic, economic, cultural, and industrial proximity play the dominant role in the choice of overseas listing venue. Contrary to the notion that firms maximize international portfolio diversification gains in listing abroad, cross-listing activity is more common across markets for which diversification gains are relatively low. Our findings imply that the same proximity constraints that are believed to lead to “home bias” in investment portfolio decisions also exert a profound influence on financing decisions.

Using a broad sample of international corporate bond offerings, we provide evidence that corporate borrowers make opportunistic currency choices, in that they denominate the currency of their bonds in a manner that is inconsistent with a belief in either covered or uncovered interest rate parity. Using firm-level tests, we identify a number of characteristics of firms that engage in opportunistic behavior. We observe that large issuers located in developed markets with investment-grade ratings and low cash flow characterize those firms that are responsive to covered borrowing rate differences across currencies. Corporate responsiveness to uncovered borrowing rate differences appears more general. We observe that although the gains firms achieve through opportunistic currency denomination are economically significant, the yield differential tends to systematically decline after issuance. This finding suggests that opportunistic issuance by corporations may be a primary mechanism for driving covered interest yields toward parity.

An expanding literature asserts that non-US firms achieve a unique valuation premium for listing on US equity markets. In this paper we test the uniqueness of the US foreign listing premium by examining the premium achieved by foreign listings across a global set of stock exchanges. We highlight that the documented valuation premium for listing on US exchanges is not unique but common to many home and host markets including US firms that list abroad. The cross-sectional variation in the valuation premium appears to have little association with such cross-country institutional features as investor protection rules, law enforcement practice, or accounting disclosure standards. Rather the premium appears most related to variation in pre-listing valuation ratios.