Determinants and Market Impact of Seasoned Equity Offerings: The Case of A-REITs
Queensland University of Technology
University of New South Wales (UNSW)
August 21, 2009
22nd Australasian Finance and Banking Conference 2009
The paper examines the decision by Australian Real Estate Trusts (A-REITs) to issue seasoned equity offerings from 2000-2008 and stock market reaction to the offerings. The findings review that highly leveraged A-REITs with variable earnings are less likely to issue seasoned equity offerings. Inconsistent results for structure and type of properties held by the A-REIT do not allow for inference to be drawn. Similar to previous studies of seasoned equity offerings, we find a significant negative abnormal return associated with their announcement and no evidence of excessive leakage of information. Furthermore, market reaction differences to announcements of SEOs for the pre-global financial crisis (GFC) (2000-2006) and GFC eras (2007-2008) are noted with GFC era shareholders incurring larger abnormal return losses at 1.13% in comparison to the pre-GFC era shareholder loss of 0.34% on the SEO announcement day. Cross-sectional regressions show that the issued amount, leverage and profitability are significant factors affecting abnormal returns. Growth opportunities, tangibility, operating risk, size of A-REIT and other variables capturing A-REIT structure and property types held do not have an impact on abnormal returns.
Number of Pages in PDF File: 30
Keywords: A-REITs, Seasoned equity offerings, Market reaction, Global financial crisis
JEL Classification: G14, G19working papers series
Date posted: August 24, 2009 ; Last revised: April 14, 2010
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