Jennifer E. Bethel

Block Share Purchases and Corporate Performance

This paper investigates the causes and consequences of activist block share purchases in the 1980s. We find that activist investors were most likely to purchase large blocks of shares in highly diversified firms with poor profitability. Activists were not less likely to purchase blocks in firms with shark repellents and employee stock ownership plans. Activist block purchases were followed by increases in asset divestitures, decreases in mergers and acquisitions, and abnormal share price appreciation. Industry-adjusted operating profitability also rose. This evidence supports the view that the market for partial corporate control plays an important role in limiting agency costs in U.S. corporations. Copyright The American Finance Association 1998.

Managing the Costs of Issuing Common Equity: The Role of Registration Choice

We analyze the costs and benefits of unallocated shelf registration and explore why only a fraction of eligible firms that issue common equity take advantage of this streamlined process. We find unallocated shelf is most cost effective for firms with low information asymmetry. The market does not discount these firms’ shares when managers register common equity on shelves. Firms pay lower gross spreads and access the market faster than do firms that use the traditional registration procedure. In contrast, the market deeply discounts the shares of high information asymmetry firms that choose to register and issue common equity off shelves.