Seasoned Equity Offerings, Operating Performance and Overconfidence: Evidence from the UK

Posted: 2 Apr 2009

See all articles by Panagiotis Andrikopoulos

Panagiotis Andrikopoulos

Centre for Financial and Corporate Integrity (CFCI), Coventry University

Abstract

Prior research on seasoned equity offerings in UK shows that equity issuers report a significant long-term under performance in the period following the event. However, the factors contributing to such under performance are not yet fully explored. Using a sample of rights issues for the period 1988-1998, this study suggest that the long-term under performance is significantly related to a deterioration of companies' operating fundamentals in the post-offering period. Further comparison between "Best" and "Worst" post-issue performers reveals that long-term under performance is predominantly robust in the case of fast growing firms with over-optimistic management. This evidence is consistent with the managerial overconfidence and "empire-building" hypotheses.

Keywords: Rights issues, Seasoned equity offerings, Long-term performance, Operating performance, Managerial overconfidence

JEL Classification: G14, G32

Suggested Citation

Andrikopoulos, Panagiotis, Seasoned Equity Offerings, Operating Performance and Overconfidence: Evidence from the UK. Journal of Economics and Business, Vol. 61, No. 3, pp. 189-215, 2009. Available at SSRN: https://ssrn.com/abstract=1372177

Panagiotis Andrikopoulos (Contact Author)

Centre for Financial and Corporate Integrity (CFCI), Coventry University ( email )

Priory Street
Coventry, CV1 5FB
United Kingdom
+44(0)247 765 7920 (Phone)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
566
PlumX Metrics