When extended to sovereign issuers, the Merton‐type structural model suggests a negative relationship between sovereign credit default swap (CDS) spreads and stock prices. In practice, capital structure arbitrage that exploits such relationships should foster the integration of CDS and the...

We use over 200 firms in Taiwan to examine two issues: (1) how investors in Taiwan react to seasoned equity offerings (SEOs) when firms plan to make capital investments, and (2) factors driving the underwriting price of the stock offerings. Our results indicate that investors seem to have strong...