This study provides evidence on how venture capitalists’ (VCs’) allocations of capital to riskier investments, as measured by the proportion of early versus late-stage investment in an industry, are linked to exit market conditions. Prior research has primarily focused on how VCs adjust aggregate investment to public equity market conditions. We develop a more inclusive measure of exit market conditions that accounts for recent secular changes that have affected the industry return structure, specifically, the sharp rise in the number of failures and M&A relative to IPO exits. We show that the dollars gained relative to dollars lost in recent exits and failures are significantly positively related to VCs’ allocations to early-stage companies over the period 1990–2008. The changes in allocations are large enough to have an effect on the availability of funding for early stage companies. In sum, our evidence shows that exit market conditions have a significant and economically meaningful influence on VCs’ allocations to riskier investments.

We examine the in-roads commercial banks have made into equity underwriting over 1990–2002. While banks end the period handling upwards of 25% of equity underwriting, this increase results almost exclusively from acquisitions of investment banks with an already established market share of equity underwriting. We find a significant decline in the market share of equity underwriting that banks acquired in the post-merger period, a decline that is larger than that experienced by independent investment banks of comparable reputation. Banks lose market share because they originate fewer IPOs and their IPOs have a lower incidence of follow-on SEOs compared to independent investment banks. Following the merger, banks experience a large fall off in their ability to retain follow-on SEOs and are less successful in winning SEO mandates when an issuer switches from its IPO underwriter. Overall, the findings suggest it has been difficult for banks to achieve scope economies in equity underwriting.

This paper investigates the motivations for and consequences of including a broad group of employees in leveraged buyouts by comparing employee buyouts (EBOs) to transactions where only top level managers participate, or management buyouts (MBOs). We examine the implications of including employees in a buyout from a labor contracting, financing, and management control point of view. A major finding is that employee participation helps to finance the buyout. The EBO allows firms to gain access to excess pension assets by converting employees' defined benefit pension capital into equity claims, thus freeing the excess assets in the pension plan to help fund the buyout. Also, employee participation substitutes equity claims for cash labor compensation costs and therefore allows the firm to borrow more than otherwise would be possible. There is also evidence consistent with managers including employees to maintain or enhance incumbent management's control.

Corporate debt sales have been regarded as “no news” events because there is no significant price reaction on average to their announcement. We explore the hypothesis that this lack of average price reaction to debt sale announcements is explained by the partial anticipation of debt offers. Theory suggests that the demand for debt capital is fundamentally related to changes in the sources and uses of funds, and we find evidence that earnings are significantly lower, investment growth is significantly higher, and, for some issuers, debt refunding requirements are significantly greater in the period immediately prior to issue than in periods well before and after the issue. We find that this preissue information conditions investors’ expectations of issue, thereby affecting the cross-sectional announcement date price reaction to debt sales in two ways. First, announcement date price reactions are negative, on average, for unanticipated offers or for those offers where prior information suggests that an issue is unlikely. Second, holding the probability of issue constant, announcement date price reactions are significantly more negative for offers that raise more capital than investors expected. These results are consistent with cash flow signaling and asymmetric information models of corporate financings.

This article examines the impact of U.S. firms issuing equity in multiple markets. We compare the stock price reactions to announcements of global equity offers to a control group of issues offered exclusively in the domestic U.S. market. All else equal, the adverse price reaction that typically accompanies equity issuance is reduced by 0.8 percent when some shares are sold abroad. The overall evidence suggests global offers are effective in expanding demand and reducing the price pressure effects associated with share issuance. The beneits of global offers appear to be associated with an increase in the number of foreign shareholders.

ABSTRACT We examine the effects of Title I of the Jumpstart Our Business Startups Act for a sample of 312 emerging growth companies (EGCs) that filed for an initial public offering (IPO) from April 5, 2012 through April 30, 2015. We find no reduction in the direct costs of issuance, accounting, legal, or underwriting fees for EGC IPOs. Underpricing, an indirect cost of issuance that increases an issuer's cost of capital, is significantly higher for EGCs compared to other IPOs. More importantly, greater underpricing is present only for larger firms that are newly eligible for scaled disclosure under the Act. Overall, we find little evidence that the Act in its first three years has reduced the measurable costs of going public. Although there are benefits of the Act that issuers appear to value, they should be balanced against the higher costs of capital that can occur after its enactment.