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Patterns in the Timing of Corporate Event Waves

Published online by Cambridge University Press:  08 November 2010

P. Raghavendra Rau  and
Aris Stouraitis
P. Raghavendra Rau
Affiliation:
University of Cambridge, Judge Business School, Trumpington Street, Cambridge CB2 1AG, United Kingdom. r.rau@jbs.cam.ac.uk
Aris Stouraitis
Affiliation:
School of Business, Hong Kong Baptist University, Renfrew Road, Kowloon Tong, Hong Kong, People’s Republic of China. stoura@hkbu.edu.hk
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Abstract

Corporate events happen in waves. In this paper, we examine the timing patterns of 5 different types of corporate event waves (new stock and seasoned equity issues, stock- and cash-financed acquisitions, and stock repurchases) using a comprehensive data set of more than 151,000 corporate transactions over the 25-year period from 1980 to 2004. We document a distinctive pattern, previously not found in the literature, in the way stock-related waves form. Corporate waves seem to start with new issue waves (seasoned equity offering preceding initial public offering waves), followed by stock-financed merger waves, followed in turn by repurchase waves. Our results hold over separate decades and across industries. Our results seem consistent with both the neoclassical efficiency hypothesis and the misvaluation hypothesis, and there are distinct periods when one or the other appears dominant.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 1 , February 2011 , pp. 209 - 246
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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