Under new management: Equity issues and the attribution of past returns

Malcolm Baker, Yuhai Xuan

Research output: Contribution to journalArticlepeer-review


There is a strong link between measures of stock market performance and subsequent equity issues. We find that management turnover weakens the link between equity issues and the returns that preceded the new chief executive officer (CEO). Moreover, there is a discontinuity in the distribution of equity issues around the specific share price that the CEO inherited, while there is no discontinuity around salient share prices prior to turnover. The evidence suggests that capital allocation involves an attribution of past returns not only to the firm but also to its CEO. A corollary is that a firm with poor stock market performance may be better able to raise new capital if its current CEO is replaced.

Original languageEnglish (US)
Pages (from-to)66-78
Number of pages13
JournalJournal of Financial Economics
Issue number1
StatePublished - Jul 1 2016


  • CEO turnover
  • Equity issues
  • Reference point
  • Seasoned equity offerings

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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