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Share Price Reaction To Security Offerings By Hospitality Firms

University of Central Florida

Stephen F. Borde

University of Central Florida

Stanley M. Atkinson

University of Central Florida

This study examines the share price reaction to security offering announcements by hospitality firms. Results indicate that a significant negative market reaction is triggered on average when firms announce new equity issues. However, no significant share price reaction occurs when firms announce new debt issues. Cross-sectional analyses of announcement period abnormal market returns indicate that the market's reaction to equity issuance announcements is more favorable or less unfavorable for larger firms. The impact of security offerings is important to investors, managers, creditors, and other stakeholders, as security offerings can have a significant impact on the value of the firm and on the firm's cost of capital.

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