Narrow Results

We compare valuation effects associated with debt issuance under SEC Rule 144A versus issuance in the public market. We find that nonconvertible debt Rule 144A issuers experience an incremental positive announcement effect when compared to their counterparts issuing in the public market. We attribute this to the timing of issuance under favorable market conditions and a reduction in informational asymmetry due to lender specialization. When compared to their public counterparts, convertible Rule 144A bond issuers often experience negative announcement effects and inferior post-issuance stock performance. We argue that this negative market reaction arises from a stronger opportunistic market-timing signal.