Pre-Issue Investor Optimism And Post-Issue Underperformance

Prior studies have documented long-run underperformance of security offerings, with equity issuers underperforming debt issuers. The authors use an investor optimism index based on analyst forecast properties to investigate how investor optimism changes within the one-year period surrounding security offerings month, whether investor optimism differs between equity issuers and debt issuers, whether such difference affect firms' financing choices, and whether investor optimism is associated with post-issue underperformance. Their paper provides direct empirical evidence linking pre-issue investor optimism and post-issue performance.