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Corporate Financing Decisions and Efficient Capital Markets - page 27 / 28

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Timing the Issuance of New Financings

In an efficient market managers should not be able to time issues of new securities.

Year to year variation in the use of new financing appears as if it is explained by firms' attempts to time new issues.  New issues seem to follow rises in stock price.

May be attempts to exploit weak or semi-strong form inefficiency.

Price rise may simply reflect a new investment opportunity.

Inside information.

Price Pressure

In an efficient market a firm will be able to issue as much equity as it wishes without fear of depressing price due to an "over-supply" of its claims.

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