| Summary: | This dissertation presents two essays dealing with corporate equity transactions. The first essay concerns an equity issuing transaction, the initial public offering (IPO), and specifically lockups, which restrict sales by pre-IPO shareholders. We improve upon the methodology for testing theory related to lockup length through the use of a multinomial logit as well as explore the reasons for and implications of multiple lockup agreements. We find that multiple lockups are associated with dual class equity structures, high book-to-market values, and more secondary shares offered. Offerings that include multiple lockups are more likely to deviate in (weighted average) length from the typical 180 day lockup term. Additionally, we are the first to associate lockup decisions with long run stock performance.
The second essay addresses a corporate equity reducing transaction, the accelerated share repurchase (ASR). In an ASR, the repurchasing firm receives substantially all of the shares subject to the repurchase immediately instead of over a longer period of time as in an open market repurchase (OMR). In this second essay, we investigate whether the immediacy of the ASR allows the firm to increase earnings per share by distributing earnings over fewer shares, and indeed we find that firms that would be expected to fall two or more cents shy of median earnings expectations are very significantly more likely to elect an ASR as compared to an OMR. In contrast, those firms that would be expected to exceed earnings by two or more cents are weakly significantly less likely to elect an ASR. Further, the form of repurchase does not impact earnings performance in the four quarters subsequent to a repurchase. Despite the higher abnormal returns associated with the announcement of an ASR, the market does not appear to be able to tell at the time of announcement whether the repurchase is manipulative. In the long run, manipulative repurchasers perform more poorly than non-manipulative repurchasers, but perform better than those firms that miss expectations.
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