THE LONG‐RUN PERFORMANCE OF COMPANIES THAT WITHDRAW SEASONED EQUITY OFFERINGS

We examine the long‐run stock price and operating performance of companies that withdraw seasoned equity offerings (SEOs). Firms that withdraw an offering provide an opportunity to examine whether markets fully adjust to the information conveyed when managers announce the intent to issue shares, ind...

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Bibliographic Details
Published in:The Journal of financial research 2000-07, Vol.23 (2), p.157-178
Main Authors: Alderson, Michael J., Betker, Brian L.
Format: Article
Language:English
Subjects:
Equity financing
Financial performance
Statistical analysis
Stock prices
Studies
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Summary:We examine the long‐run stock price and operating performance of companies that withdraw seasoned equity offerings (SEOs). Firms that withdraw an offering provide an opportunity to examine whether markets fully adjust to the information conveyed when managers announce the intent to issue shares, independent of any agency problems that might be intensified by the completion of the offering. As in completed seasoned equity offerings, long‐horizon event‐time operating and stock price performance in sample firms is substantially lower than what is observed among control firms. Underperformance is also observed in an equally weighted calendar‐time analysis. Results are consistent with overpricing among small firms that attempt, but then withdraw, SEOs.
ISSN:0270-2592
1475-6803
DOI:10.1111/j.1475-6803.2000.tb00737.x