AN EXAMINATION OF VOLUNTARY VERSUS INVOLUNTARY SECURITY ISSUANCES BY COMMERCIAL-BANKS - THE IMPACT OF CAPITAL REGULATIONS ON COMMON-STOCK RETURNS

This paper examines differences in stock price reactions following voluntary capital injections by commercial banks and involuntary capital injections required to meet regulatory capital requirements. Empirical tests document that stock price declines associated with voluntary common stock issues are significantly greater than those associated with involuntary common stock injections, consistent with Ross (1977). Empirical tests also confirm that for both voluntary and involuntary stock issuances, the abnormal stock price reaction is negatively related to the relative size of the offering and positively related to managerial ownership prior to the security issue, although these relationships are stronger for voluntary issues.