تاثیر باورهای ناهمگون و محدودیت های فروش کوتاه مدت بر تصمیم گیری صدور اوراق امنیتی

Extant literatures discuss a firm's security issuance implications of heterogeneous beliefs with explicit assumption that short selling is forbidden. However, it is widely accepted that short sale constraints exist when investors are unable to short stock to the extent they desire. This paper presents a model to analyze how heterogeneous beliefs and short sale constraint conditions jointly affect a firm's security issuance decision. The main findings are: i) An increase in heterogeneity in investors' beliefs results in an increased likelihood of equity issuance over debt when public signal is favorable, whereas it results in a reduced likelihood when public signal is modestly adverse. ii) The tightness of short sale constraints has a positive effect on the likelihood of equity issuance only when public signal is highly favorable. These results indicate widely divergent conclusions about the relations between heterogeneous beliefs as well as short sale constraints and security issuance decision.

Whether and how heterogeneous beliefs among investors affect a firm's security issuance decision has been an important issue. In a main strand of extant literatures, the study of investors' heterogeneous beliefs is developed under a behavioral corporate finance theory whose underpinning foundation is the cognitive psychology literature with the belief that people are in general overconfident (see, e.g., Alicke, 1985 and Scheinkman and Xiong, 2003). Researchers have extended the psychology literature to behavioral corporate finance and find that participants in financial market, as a special group, are more likely to exhibit overconfidence than ordinary people (see, e.g., Grinblatt and Keloharju, 2009 and Statman et al., 2006). Papers on security issuance implications of heterogeneous beliefs are relatively scarce. A notable exception in this regard, is Chemmanur and Liu (2006) who draw heterogeneity in beliefs from a uniform distribution and propose a security issuance model with explicit assumption that short selling is forbidden. They show that heterogeneous beliefs among investors will increase the likelihood to issue equity for a firm under the belief that the divergence of investors' opinions and the constraint of short selling generate a price bubble and thus create a window of opportunity for equity issuers to raise capital at a low cost. Consistent with such prediction, a few empirical studies have found that the characteristics of investors, particularly heterogeneous beliefs may lead to distortions in firms' security issuance decision and that the more heterogeneous the investors' beliefs are about the firm, the more likely a firm is to issue equity rather than debt (see, e.g., Chemmanur et al., 2009). More recently, Bayar et al. (2010) incorporate significant issuance cost and financial distress cost into Chemmanur and Liu (2006) framework and predict that a firm issues equity when investors' beliefs are highly dispersed; straight debt when investors' beliefs are least dispersed; and convertible debt when outsider beliefs are between the above two extremes. Their analysis generates a pecking order of external financing under heterogeneous beliefs. Unfortunately, the above two theoretical papers suffer from a problem at least. They don't specify whether heterogeneous beliefs occur for an irrational reason or not. Actually, if an investor is willing to pay for equity with above average price, he must be overconfident (see, e.g., Miller, 1977). Moreover, the overvaluation of stocks with a divergence in investors' beliefs is not inevitable. Most of the previous empirical works on asset pricing implication of heterogeneous beliefs show that, the stock with dispersion in investors' opinion could be either overvalued or undervalued (see, e.g., Cao and Ou-Yang, 2004, Hong et al., 2006, Daniel et al., 2001 and Varian, 1989). The above papers discuss the relation between heterogeneous beliefs and security issuance decision without invoking any assumption on short selling. Even though short selling is allowed, pessimistic investors are unable to short stock to the extent they desire when there is strong demand and limited supply. In previous papers, the tightness of short sale constraints, i.e., the difficulty of shorting stock for investors could be one explanation for financing distortions (see, e.g., Chemmanur et al., 2009).The short selling view argues that the greater the constraint on short sale, the greater the price bubble, for giving the amount of divergence in investors' beliefs (see, e.g., Asquith et al., 2005 and Nagel, 2005). An open question is how the interaction of heterogeneous beliefs among investors with short sale constraints may affect a firm's security issuance decision. It is likely that the tightness of short sale constraints may affect a firm's likelihood of equity issuance. Specifically, the difficulty of shorting for investors may change the effect of investors' characteristics on security issuance. In this paper, we develop a model of security issuance under heterogeneous beliefs in an equity market with short selling, and provide some novel answers to the above questions. It is important to point out that, this paper is the first to analyze the effect of heterogeneous posterior beliefs on security issuance. In our model, heterogeneous beliefs arise from different interpretations of public information about the firm's future prospects between different types of investors. In contrast to our paper, Dittmar and Thakor (2007) focus on difference of opinion between firm insiders and outside investors as a group. In their setting, investors have heterogeneous priors “agree to disagree” about the project's payoff. In addition, unlike our paper, Bayar et al. (2010) use the dispersion of probability that the firm will achieve the high cash flow among investors to measure the prior heterogeneity in beliefs. The purpose of this paper is to show how heterogeneous beliefs among investors and short sale constraint conditions jointly determine a firm's security issuance decision. Our findings show that the heterogeneity in investors' beliefs has a positive effect on the likelihood of equity issuance over debt when public signal is favorable, but has a negative effect on that when public signal is modestly adverse. We also show that the tightness of short sale constraints has a positive effect on the likelihood of equity issuance over debt only when public signal is highly favorable. Our results suggest that public signal has an impact on the relations between heterogeneous beliefs as well as short sale constraints and security issuance decision. Our paper contributes to extant literatures in at least two ways. Considering a realistic assumption that investors are unable to short stock to the extent they desire, we explore the joint impact of the heterogeneity in investors' beliefs and the tightness of short sale constraints on a firm's security issuance decision. Furthermore, considering several scenarios that investors may face in reality, we stress security issuance implications of heterogeneous posterior beliefs generated by investors' overconfidence. The remainder of this paper is organized as follows. Section 2 develops the model. The analysis and numerical simulation of security issuance decision appear in Section 3. Section 4 concludes. The proofs of all theorems and propositions are in the appendixes.

Extant literatures analyze the implication of heterogeneous beliefs on a firm's security issuance in an explicit environment that short selling is forbidden. However, reality often departs in a significant way from this assumption. In order to explore the distortion in security issuance decision under multiple circumstances, in this paper three types of speculative equilibria are established in an equity market where the supply of share to short is limited. To the best of our knowledge, there is yet to be a contribution that deals in a general and exhaustive way with security issuance decision that is jointly determined by heterogeneous beliefs and short sale constraint conditions. One major result of this paper is that the heterogeneity in investors' beliefs has a positive effect on the likelihood of equity issuance over debt when public signal is favorable, but has a negative effect on that when public signal is modestly adverse. We add to the literatures on security issuance by providing a formal illustration of the relation between heterogeneous beliefs and the likelihood of equity issuance with multiple scenarios. Moreover, our model also suggests that public signal plays an important role in determining the relation between short sale constraints and the likelihood of equity issuance. As long as investors are able to short the stock to the extent they desire, short sale constraint has no effect on security issuance decision. In contrast, Chemmanur et al. (2009) show that the more heterogeneous the investors' beliefs, and the tighter the constraint on short sales, the more likely the firm is to issue equity rather than debt. We highlight the role of public signal in the process of security issuance decision. Thus, this paper provides a valuable signal to outsiders as well as firms' managers, because it offers widely divergent conclusions about how the characteristics of investors as well as short sale constraint conditions influence a firm's decision. Most of the shortcomings in our work are as follows: For example, short interest ratio representation of short sale constraints disregards the cost of short selling. Even if the supply to short is unlimited, a higher cost of short selling will increase the difficulty to arrive at the optional portfolio for investors. Furthermore, we consider only the spread of opinion between two groups of investors, i.e., the rational and the overconfident investors in our analysis. Incorporating the divergence of opinion among investors in each group could shed more light on the effect of heterogeneous beliefs in different scenarios. Lastly, we analyze only the likelihood of equity issuance. Considering price reaction to straight debt issuance could enrich our understanding of a firm's choice between equity and debt. Such issues in detail are beyond the scope of this paper and will be analyzed in future research.