Equity Financing Capacity and Stock Returns: Evidence from China

30 Pages Posted: 27 Jul 2012 Last revised: 8 Mar 2015

See all articles by Mohan Fonseka

Mohan Fonseka

Xi'an Jiaotong University (XJTU)

Lalith P. Samarakoon

University of St. Thomas

Gao-Liang Tian

Xi'an Jiaotong University (XJTU) - School of Management

Date Written: July 1, 2012

Abstract

We examine the relation between the capacity for financing through rights and seasoned public offers of equity and subsequent stock returns in China. The results show that the capacity for rights and public offers is reliably negatively related with future returns for firms that met regulatory criteria. Further, the capacity for rights offers is strongly negatively related with returns for firms that met the criteria and applied for approval, and for firms that issued equity after meeting the criteria and obtaining approval. Thus, there is clear evidence of a negative relation between equity financing capacity and stock returns in China.

Keywords: Equity financing capacity, stock returns, rights offers, public offers, China

JEL Classification: F3, G12, G15, G32

Suggested Citation

Fonseka, M. M. and Samarakoon, Lalith P. and Tian, Gao-Liang, Equity Financing Capacity and Stock Returns: Evidence from China (July 1, 2012). Journal of International Financial Markets, Institutions and Money, 22:1277-1291 (2012), Available at SSRN: https://ssrn.com/abstract=2118616

M. M. Fonseka

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Lalith P. Samarakoon (Contact Author)

University of St. Thomas ( email )

2115 Summit Ave
St. Paul, MN 55105
United States

HOME PAGE: http://www.lalithsamarakoon.com

Gao-Liang Tian

Xi'an Jiaotong University (XJTU) - School of Management ( email )

28,Xianning West Road
Xi'an, Shaanxi 710049
China

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
99
Abstract Views
843
Rank
482,506
PlumX Metrics