Faculty of Science, Technology and Medicine
Faculty of Law, Economics and Finance
Faculty of Humanities, Education and Social Sciences
Interdisciplinary Centre for Security, Reliability and Trust
Luxembourg Centre for Systems Biomedicine
Luxembourg Centre for Contemporary and Digital History
Luxembourg Centre for European Law
Luxembourg Centre for Socio-Environmental Systems
“Conditional pecking order”
With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.
Abstract
We formally include debt in a Myers and Majluf (1984) setting with asymmetric information about the assets in place. In our theory, issuing firms pool and select the security that minimizes the adverse market reaction. Both debt and equity issues yield negative announcement returns. However, conditional on the equilibrium security choice, the reaction is less negative for debt. Our large-sample empirical analysis documents negative announcement returns to debt issues. Moreover, using an endogenous switching regression model to address the self-selection in the security choice, we show that firms issue the security with the least negative expected return, as predicted.
About the speaker
Karin S. Thorburn is Research Chair Professor of Finance at NHH Norwegian School of Economics and Adjunct Full Professor of Finance at The Wharton School of University of Pennsylvania, USA. Before joining NHH in 2009, she was a full-time faculty member at the Tuck School of Business at Dartmouth College, USA.
Language
English.
This is a free event. Registration is mandatory.
Cold lunches are provided to registered participants only.
In collaboration with
Supported by the Luxembourg National Research Fund (RESCOM/2025/LE/19440690)