Ch. 6: Security Offerings 341
and (9) information on market value of equity must be available. This results in a total
sample of 44,986.
The breakdown of the total sample of 44,986 offerings across different types of se-
curity offerings is shown below. The second column of numbers indicates the sample
size when we also require the issuer to have Compustat information on equity book-
to-market ratio (B/M). The latter constraint is imposed when we identify non-issuing
firms matched on B/M.^50
Sample for the survey’s long-run analysis (N= 44 ,986)
Security type Total B/M available
IPO 5 , 907 5 , 403
SEO 6 , 698 6 , 285
Private placement of equity 506 506
Preferred equity 1 , 530 1 , 412
Convertible debt 1 , 157 897
Private placement of debt 9 , 584 8 , 584
Public straight debt issue 18 , 447 17 , 360We start the abnormal return analysis using the matched firm technique which re-
quires B/M information. We then report the results of risk adjustments using factor
regressions of portfolios of issuing firms.
5.3.2. Cumulative buy-and-hold returns for issuers versus matched firms
The typical buy-and-hold experiment involves buying the issuing firm’s stock in the
month following the issue month, and holding the stock for a period of three to five
years or until delisting, whichever comes first. In a sample ofNissues, the average
return over a holding period ofT months is computed as the average cumulative (T-
period) return, also referred to asBHR (for “buy-and-hold return”):
BHR≡ (6)
1
ωi∑N
i= 1[ Ti
∏t=τi( 1 +Rit)− 1]
,
whereRitdenotes the return to stockiover montht, andωiis stocki’s weight in
forming the average holding-period return (ωi = 1 /Nwhen equal-weighting). The
(^50) Book value is defined as “the Compustat book value of stockholders equity, plus balance sheet deferred
taxes and investment tax credits (if available), minus the book value of preferred stock. Depending on avail-
ability, we use the redemption, liquidation, or par value (in that order) to estimate the value of preferred stock”
(Fama and French, 1993, p. 8). If available on Compustat, the issuer book value of equity is also measured
at the end of the year prior to the issue year. If this book value is not available, we use the first available
book value on Compustat starting with the issue year and ending with the year following the issue year. On
average, the first available book value is found 6.1 months after the offer date.Brav and Gompers (1997)look
a maximum of 12 months ahead for book values whileBrav, Geczy, and Gompers (2000)look a maximum of
18 months ahead.