Does Corporate Finance Theory Extend to the New Normal? Evidence from Security Offerings during the COVID-19 Pandemic

We document substantial increases in corporate security offerings since the start of the COVID-19 pandemic. While the rise in SEOs is attributable to shifts in macroeconomic conditions, convertible and straight bond offering increases cannot be explained by standard security choice determinants or government interventions. COVID-period SEO announcements are often contaminated by positive R&D-related news, with COVID-period offering proceeds more likely to be hoarded as cash. Overall, COVID-period SEOs are consistent with market timing behavior, whilst COVID-period convertibles and straight bonds cannot be reconciled with pre-pandemic rationales. New theories may be needed to explain corporate financing decisions following long-lived multidimensional shocks.