The Equity in Equity Issuances

48 Pages Posted: 13 Nov 1998

See all articles by Alon Brav

Alon Brav

Duke University - Fuqua School of Business; European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Christopher Geczy

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)

Date Written: October 1998

Abstract

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.

JEL Classification: G1, G2

Suggested Citation

Brav, Alon and Geczy, Christopher Charles and Gompers, Paul A., The Equity in Equity Issuances (October 1998). Available at SSRN: https://ssrn.com/abstract=138492 or http://dx.doi.org/10.2139/ssrn.138492

Alon Brav

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-2908 (Phone)
919-684-2818 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christopher Charles Geczy

University of Pennsylvania - The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
(215) 898-1698 (Phone)
(215) 898-6200 (Fax)

Paul A. Gompers (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)

Harvard University - Entrepreneurial Management Unit ( email )

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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