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Options Trading and Equity Financing

초록

영어

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.

목차

Abstract
 1. Introduction
 2. Literature review
  2.1 The role of options markets
  2.2 Firms’ equity financing
 3. Data and Empirical Specification
  3.1 Data
  3.2 Empirical specification
 4. Results
  4.1 Benchmark results
  4.2 Instrumental variables approach
  4.3 Difference-in-differences regression analysis
  4.4 Within option firms analysis: Options markets liquidity
  4.5 Market conditions and the option effect
 5. Conclusion
 References
 Table
 Appendix A

저자정보

  • Joong Ho Han SKKU Business School
  • Da Hea Kim KAIST College of Business
  • Suk Joon Byun KAIST College of Business

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