Explaining Communication Choices during Equity Offerings: Market Timing or Impression Management?
Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review
Opinions are divided on whether firms use corporate reports (i) to communicate with external parties in a clear and transparent manner (incremental information hypothesis), (ii) to shape messages to suit their own agenda, or, worse still, (iii) 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. 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.
Original language | English |
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Title of host publication | Handbook of Investor Relations and Financial Communications |
Editors | A. Laskin |
Publisher | Wiley |
ISBN (print) | 9781119240785 |
Publication status | Published - Nov 2017 |