Explaining Communication Choices during Equity Offerings: Market Timing or Impression Management?

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Title: Explaining Communication Choices during Equity Offerings: Market Timing or Impression Management?
Authors: Hemmings, Danial R.
Brennan, Niamh
Merkl-Davies, Doris M.
Permanent link: http://hdl.handle.net/10197/9280
Date: Nov-2017
Abstract: Opinions are divided on whether firms use corporate reports (1) to communicate with external parties in a clear and transparent manner (incremental information hypothesis), (2) to shape messages to suit their own agenda, or, worse still, (3) to mislead audiences (impression management hypothesis). Two competing hypotheses are considered in this chapter to explain why equity offerings coincide with stock overpricing. The dominant hypothesis to date – the market timing hypothesis – is that managers opportunistically time equity offerings to coincide with high stock prices. The empirical evidence supporting this hypothesis is ambiguous. The impression management hypothesis offers an alternative perspective. In this context, impression management entails the construction of an impression by organizations with the intention of influencing stockholders’ view of the firm as reflected in the stock price. Managers may engage in impression management, using persuasive language in pre-equity-offering communications (e.g., narrative disclosures), to drive up the stock price in advance of planned equity offerings.
Type of material: Book Chapter
Publisher: Wiley
Copyright (published version): 2017 Wiley
Keywords: Equity offerings;Communication;Market timing;Impression management;Information asymmetry
Language: en
Status of Item: Peer reviewed
Is part of: Laskin, A.V. (ed..). The Handbook of Financial Communication and Investor Relations
Appears in Collections:Business Research Collection

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