r. david mclean, jeffrey pontiff and akiko watanabe - Center for ...

momentum that are available immediately before the ISSUE-construction months, as well as
on the twelve-month lag of ISSUE (LAG-ISSUE). We estimate six different regression
specifications; first using equal-weights, value-weights, and scaled-weights with country
dummies and then without country dummies.
In all six regressions, the coefficients on size are both negative and significant,
suggesting that large firms issue fewer shares than do small firms. The coefficients on the
momentum and lagged issuance measures are both positive and significant in all six
regressions. This implies that firms with high past returns and firms that have recently issued
shares are likely to issue more shares. These findings are consistent with Pontiff and
Woodgate’s (2006) U.S. findings.
The book-to-market coefficients are positive in all six regressions, but are significant
only in the equal-weighted regressions. This suggests that high book-to-market firms issue
more shares and low book-to-market firms buyback more shares, and that this pattern is more
strongly observed among large firms. The result is in stark contrast to the findings for U.S.
firms, in which low book-to-market firms tend to issue more shares (see Loughran and Ritter
(1995), Baker and Wurgler (2002) and Pontiff and Woodgate (2006)).
The use of country dummies does not have a strong effect on the regression
coefficients; economic and statistical significances of the coefficients are mostly similar in
the regressions with country dummies and those without. However, the average R 2 statistics
from the regressions with country dummies are more than twice as large as those from the
regressions without the dummies. Thus, country of origin explains as much of the variation in
share issuances as do the individual firm characteristics that are included in the regressions.
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