This study explores the role of issuance expenses in explaining the fall in stock value for OTC stock offerings that raise cash for debt reduction purposes. It estimates that over half of the sample's -2.79% two-day fall in stock value can be accounted for by issuance expenses when using a lower...

We examine the announcement period of stock returns for 179 over-the-counter (OTC) firms that issue common stock to reduce nonconvertible debt. We find that small OTC firms experience returns that are significantly more negative than large OTC firms. Regression tests reveal that firm size is a...