Charles J. Corrado, John Schatzberg, A Nonparametric Distribution-Free Test for Serial Independence in Stock Returns: A Correction, The Journal of Financial and Quantitative Analysis, Vol. 25, No. 3 (Sep., 1990), pp. 411-415

This paper examines possible motives for and consequences of voluntary corporate liquidations. Specifically, the procedural and tax differences between voluntary liquidations and other control-changing transaction devices are analyzed. An empirical investigation of successful liquidations shows that the announcement of liquidation reduces the risk of liquidating shares, that the shareholders receive substantial gains from successful liquidations, and that the average gains to the acquiring shareholders are not significantly different from zero. These findings suggest that the liquidating firms' assets have been underutilized before liquidation and that voluntary liquidations lead to higher-valued reallocations of corporate resources.

The theory of financial economics has failed to distinguish advantages of callable bonds from those of short‐term debt. This paper shows that either type of borrowing can signal a firm's better prospects but that short‐term debt does so at the cost of weakened risk‐sharing with capital markets. By issuing either equity or long‐term, non‐callable debt, a firm with poor investment opportunities will not pool its prospects with those of a better firm. But equity produces superior risk‐sharing. Perhaps this explains the almost complete absence of long‐term, non‐callable bonds from observed corporate capital structures.

We examine the firm's choice between an SEO and a PIPE, an innovation in follow-on equity selling mechanism seen in the late 1990s. Our primary finding indicates that the rapid rise of the PIPE market fills the capital needs of firms which may not have access to more traditional alternatives. This lack of access is driven mainly by information asymmetry and weak operating performance. We also show that firms are more likely to choose PIPEs when the general market and the firm's stock are performing poorly. Furthermore, we find that selected firms with access to the public market may prefer a PIPE due to specific cost considerations.