Return of Equity Issues in the Spanish Stock Market from the Investor’s Perspective, During the 1997–2012 Period

  • Javier ParreñoEmail author
  • Felipe Ruiz
  • Félix Roux
Conference paper
Part of the Lecture Notes in Management and Industrial Engineering book series (LNMIE)


Is it profitable for an investor, from a risk-return perspective, to acquire a stake in a quoted company when a capital increase is announced? This paper analyses the return obtained from the investment in equity issues with cash contribution and pre-emptive rights, aimed at funding corporate activities: acquisitions, investments in new facilities and/or strengthening the balance sheet of the companies undertaking the equity issue. During the 16 years covered by the study, the results show a negative average excess risk-adjusted return of almost 5 %, from the moment that the equity offer is announced until the completion of the preferential subscription period. To obtain this excess return, the difference between the nominal Internal Rate of Return (IRR) and the expected return, using the CAPM, is computed for each equity issue. The intention behind this method is to eliminate the effects of time and any other possible effect on the stock price during the period of the analysis. The results from this article are consistent with the Pecking Order theory for the Spanish Stock Market also six months after the preferential subscription period. However, there is a positive return after three months.


Equity Issues Returns Pecking Order 


  1. 1.
    Asquith P, Mullins DW Jr (1985) Equity issues and offering dilution. J Financ Econ 15(1–2):61–89Google Scholar
  2. 2.
    Aybar C, Casino A, López J (2001) Preferences hierarchy and Business Strategy in SME’s capital structure: approach with panel data. Valencian Institute of Economic Research, Department of Accounting, Valencia University, SpainGoogle Scholar
  3. 3.
    Campbell JY, Viceira LM (2002) Strategic asset allocation: portfolio choice for long term investors. Clarendon lectures in economics. Oxford university Press, OxfordCrossRefGoogle Scholar
  4. 4.
    Fama EF, French KR (2005) Financing decisions: who issues stock? J Financ Econ 76(3):549–582CrossRefGoogle Scholar
  5. 5.
    Fernández Ramos MY, de Rojas MC, Zuliani GD (2004) Verification of the pecking order theory: the case of the Spanish companies. Finance and accounting department, University of Valladolid, SpainGoogle Scholar
  6. 6.
    Myers SC, Majluf NS (1984) Corporate financing and investment decisions when firms have information that investors do not have. J Financ Econ 13:187–222CrossRefGoogle Scholar
  7. 7.
    Pastor-Llorca MJ, Poveda F (2004) Capital increases in Spain: an empirical study of equity issues rights. Department of Finance, Accounting and Marketing, University of Alicante, SpainGoogle Scholar
  8. 8.
    Sánchez-Vidal J, Martín-Ugedo JF (2004) Financing preferences of Spanish firms: new evidence for the theory of hierarchy. Economics analysis working papers, vol 3, N 8, SpainGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2014

Authors and Affiliations

  1. 1.Escuela Técnica Superior de Ingenieros IndustrialesUniversidad Politécnica de MadridMadridEspaña

Personalised recommendations