COMMON-STOCK PRICE EFFECTS OF SECURITY ISSUES CONDITIONED BY CURRENT EARNINGS AND DIVIDEND ANNOUNCEMENTS

The valuation effect of debt and equity issue announcements on stock p rice varies predictably with the timing of earnings and dividend repor ts. issue announcements closely preceding current cash flow signals ha ve more negative valuation effects. Straight debt announcements also h ave a significantly negative effect on stock price when the offer anno uncement closely precedes earnings and dividend releases. The evidence is consistent with a separating equilibrium where better performing f irms signal superior value by announcing equity offers shortly after d ividend announcements. Poorer performers appear to time equity offers just before dividend signals, which in tum are more likely to be negat ive.