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Asian Review of Financial Research, Vol., No..
pp.462~515
pp.462~515
Options Trading and Equity Financing
Joong Ho Han SKKU Business School
Da Hea Kim KAIST College of Business
Suk Joon Byun KAIST College of Business
This paper examines how option trading affects a firm¡¯s equity financing decisions. We find that option trading increases both the total amount of capital that a firm raises in the equity market and the likelihood that a firm issues equity publicly, as opposed to privately. The effects of option trading become stronger during bad economic times, when a firm¡¯s equity financing is more restricted. These findings are consistent with the notion that the availability of option contracts increases investors¡¯ demand for the underlying stock, thereby improving the accessibility of a firm to equity capital.
Joong Ho Han
Da Hea Kim
Suk Joon Byun
This paper examines how option trading affects a firm¡¯s equity financing decisions. We find that option trading increases both the total amount of capital that a firm raises in the equity market and the likelihood that a firm issues equity publicly, as opposed to privately. The effects of option trading become stronger during bad economic times, when a firm¡¯s equity financing is more restricted. These findings are consistent with the notion that the availability of option contracts increases investors¡¯ demand for the underlying stock, thereby improving the accessibility of a firm to equity capital.
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