← Search

The Underreaction Hypothesis and the New Issue Puzzle: Evidence from Japan

Jun-Koo Kang¹; Yong-Cheol Kim²; René M. Stulz³

¹ Michigan State University · ² Clemson University · ³ The Ohio State University

This article investigates the long-term equity performance of Japanese firms issuing convertible debt and equity. We find that issuing firms perform poorly (except for equity rights issues) compared to nonissuing firms even though the stock-price reaction to convertible debt and equity issues is not negative for Japanese firms. This underperformance is strongest for firms issuing public convertible debt. In contrast to the United States, poor performance is not concentrated in smaller firms and in firms with a high market-to-book ratio. Simple behavioral explanations advanced for the new issue puzzle in the United States do not seem consistent with the Japanese experience.

DOI

10.1093/revfin/12.3.0519

Volume

12 (3)

Pages

519-534

Language

en

Export

BibTeX

Sources

openalex crossref