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Explaining Communication Choices during Equity Offerings: Market Timing or Impression Management?
Date Issued
2017-11
Date Available
2018-03-09T18:42:37Z
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
Language
English
Status of Item
Peer reviewed
Part of
Laskin, A.V. (ed..). The Handbook of Financial Communication and Investor Relations
ISBN
978-1119240785
This item is made available under a Creative Commons License
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04_15_Hemmings_Brennan_Merkl-Davies_Explaining_Communication_Choices.pdf
Size
209.4 KB
Format
Owning collection
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