As would be expected, larger firms favor Euroequities, and the average Euroequity issue is larger than the average domestic-equity issue, by a factor of more than three ($204.38 million compared to $67.38 million).
A positive coefficient for the tranche variable suggests that the larger the fraction of shares issued offshore, the more subdued the domestic stock-price reaction to the announcement of a Euroequity issue. This effect, moreover, is measured net of the selection bias.
Tranche, which is zero for domestic issues and positive for Euroequity issues, would serve as the test variable measuring whether, and the extent to which, Euroequity issuers on average have realized a lower cost of equity.
We know from Exhibit 1 that large firms were responsible for most Euroequity issues during our sample period.
For the test, we regress the following independent variables on the abnormal returns for domestic-equity and Euroequity issues: the firm's beta coefficient, the size and ownership structure variables, the selection bias variable W, and tranche (the percentage of the issue in the offshore).