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Existing studies suggest that negative impacts emanating from corporate fraud revelations may diffuse to other firms through lower trust and lower market participation. Extending this literature stream, the authors examine whether corporate fraud revelations are associated with higher costs of raising capital through initial public offerings (IPOs) for industry peers.

The authors employ several analysis techniques including univariate analysis, multivariate regressions, propensity score matching methodology, and probit estimation. The sample consists of 3,015 US IPO firms for the 1996–2021 period.

By adopting US private securities class action lawsuits as a proxy for the presence of corporate fraud, the authors find that fraud revelations are associated with higher IPO underpricing, higher post-IPO stock return volatility and increased likelihood of withdrawal from the offering for industry peers. The findings are robust to alternative industry definitions and litigation proxies and to the inclusion of a battery of controls, including industry, state and year fixed effects.

This study presents private firms with an additional industry litigation factor to consider when assessing the marginal costs of going public.

Prior research has documented a guilt by association phenomenon whereby instances of corporate misconduct generate a negative spillover to innocent firms due to their shared industry membership with the wrongdoing firm. However, research on competitive dynamics predicts a positive spillover whereby some firms benefit from the revelation of financial misconduct by an industry peer. This study lends support to both these effects by highlighting the role product similarity plays in the understanding of investors' perceptions surrounding corporate misconduct.

The study assesses the investors' valuation of cash using Faulkender and Wang's (2006) methodology. The difference-in-differences approach is employed to compare the market valuation of cash held by non-accused firms with higher and lower litigation spillover risk operating in industries with higher vs lower product similarity.

The findings show that an increase in the volume and severity of misconduct by industry peers is associated with an undeserved loss in the value of cash held by non-accused firms operating in industries with high product similarity. In contrast, firms that sell differentiated products stand to gain from the troubles of the accused peer. Moreover, non-accused firms in industries with high product similarity reduce capital expenditures more following misconduct accusations against peers to preserve cash in anticipation of future lawsuits.

This study contributes to the growing spillover literature that investigates how a crisis caused by one firm affects the valuation of its peers.

The purpose of this paper is to examine whether cash flow volatility (CFV) has a negative impact on future stock returns, and whether the CFV-return relation is different among financially constrained and unconstrained firms, by using a broad sample of 21 developed markets.

The study conducts portfolio analysis to test the CFV effect on returns. Risk-adjusted returns (alphas) are computed with respect to country-specific factors based on market, size, book-to-market, and momentum.

The strategy of buying stocks with low CFV while shorting stocks with high CFV delivers significant alphas in more than three-fourths of the markets. The alphas for the long-short portfolio based on CFV are positive and statistically significant in more than 70 percent of the countries among financially constrained firms, largely driven by the underperformance of high-CFV stocks. In comparison, the CFV effect is observed in less than 45 percent of the countries among financially unconstrained firms, and is largely driven by the outperformance of low-CFV stocks.

This study extends prior findings by providing evidence of a negative relation between CFV and stock returns in a majority of global equity markets. The evidence also suggests an important role of financial constraints in explaining this relation.

In this paper, the authors examine the association between a firm's geographical location and the value of its cash holdings.

Following Loughran and Schultz (2005) and Nielsson and Wójcik (2016), the authors define firms as either geographically remote or geographically proximate based on their distance to areas that are either largely populated or concentrated in financial expertise. We also estimate the marginal value of cash using the model developed by Faulkender and Wang (2006).

The authors find that the marginal value of cash is $0.10–$0.16 lower in remotely located firms than in geographically proximate firms. The lower marginal value of cash is prominent among remotely located firms with greater severity of information asymmetry. Our findings support the view that the inability of shareholders to closely monitor how managers use of firm cash may increase the perceived conflicts of interest associated with managers' cash spending and decrease the value of cash.

Previous studies try to explain the cash holdings puzzle by attributing it to CEO overconfidence, external funding constraints, poor corporate governance, difference in corporate financial policy, poor investor protection, lack of firm diversification and large operating losses. This study contributes to the extant literature by offering new evidence of the role of geographic location on the value of cash holdings.

Short‐term cash need plays a critical role in equity issuance decisions. Consequently, the ease with which a seasoned equity offer (SEO) is completed can have a direct effect on the cost of raising equity. The purpose of this paper is to examine whether liquidity is likely to affect the ease with which an offer is completed, as proxied by the length of the offer.

This study uses multiple regression analysis to establish the link between liquidity and the duration of the SEO completion cycle. To provide support to the findings, event study methodology is employed to study the abnormal volume turnover during the pre‐SEO announcement period for firms with shorter and longer registration periods.

The paper finds that firms with greater liquidity come to market sooner. The results indicate a small yet significant effect of liquidity on the duration of the SEO completion cycle. There is also evidence that lower pre‐announcement period volume turnover is associated with a longer registration period – which has some implications for issuance costs. The results are robust to the inclusion of industry or firm effects, use of different regression specifications, and application of alternative liquidity measures.

This paper belongs to the growing literature that examines the link between liquidity and the firm's equity issuance costs. It adds to the literature by: examining the determinants of the time it takes to complete an offering; providing the evidence that liquidity may affect the ease with which investment bankers place new shares; and presenting the evidence using newer measures of liquidity based on low‐frequency data.