The Equity in Equity Issuances
Alon P. Brav
Duke University - Fuqua School of Business
University of Pennsylvania - The Wharton School, Finance Department
Paul A. Gompers
Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
We investigate the robustness of the long-run underperformance of initial public offering (IPO) and seasoned equity offering (SEO) firms from 1975-1992. The conclusion that issuer underperformance is unique is questioned by our results. We find that underperformance is largely concentrated in the smallest issuing firms. IPO firms perform identical to nonissuing firms matched on the basis of size and book-to-market. SEO firm returns can be priced by four factor regression models indicating common covariation in SEO returns with nonissuing firms. Furthermore, SEO underperformance disappears for issuances beyond the first SEO. We find that the results are robust to purging benchmarks and factor returns of IPO and SEO firms.
Number of Pages in PDF File: 48
JEL Classification: G1, G2working papers series
Date posted: November 13, 1998
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