Liquidity Changes around Seasoned Equity Issuance: Public Offerings versus Private Placements

I investigate whether firms that issue equity, in public offerings or private placements, have improved on liquidity in the secondary market. Transaction costs, price impacts, and trading activity are examined. Results show that public offering stocks become considerably more liquid in all three dimensions. For private placement stocks, there is some evidence that trading volume increases, but effective spread and temporary price impact decline less than market-wide changes. Furthermore, I study the behaviors of participants in the newly issued equity market. Analyses indicate that underwriters, analysts, and market makers all contribute to liquidity changes, but in different aspects.