Abstract
Numerous empirical studies confirm that the stock market reacts negatively to the announcement of an equity issue. Yet some seasoned offerings occasion a positive market response. Studies investigating the differentiation of positive from negative responses should contribute to our understanding of both market and firm behaviour. In addition, few studies to date have examined market responses in other institutional and/or geographical settings. A sample of 95 open offerings by Irish firms between 1987 and 1994 is investigated and, surprisingly, a neutral market response is discovered. The hypothesis that a positive market response is due to a firm's growth opportunities is tested. The intuition underlying this growth opportunity hypothesis is that investors perceive the potential gain in growth opportunities and willingly fund such investments. The Irish evidence supports this hypothesis. It is conjectured that the lack of a long-term debt market in Ireland may explain these results.
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