The information content of corporate offerings of seasoned securities: An empirical analysis

This paper examines the information content of offerings of seasoned securities (equity and debt) by public corporations by analyzing the relationship between information asymmetry and long-run changes in firm operating performance around the offerings. Both debt and equity issuers have post-issue declines in operating performance, both on an unadjusted basis and when compared to control groups based on firm size and operating performance. Among equity issuers, firms with greater information asymmetry have larger post-issue performance declines. The difference is smaller for debt issuers. We find that these results hold even after controlling for other variables which can affect operating performance, such as free cash flow, performance run up, and investment in property, plant, and equipment. Our results are consistent with information models of the decision to issue securities, such as Myers and Majluf (1984).