Corporate Governance and Investor Reactions to Seasoned Equity Offerings

47 Pages Posted: 13 Jul 2009 Last revised: 24 Jul 2009

See all articles by Rongbing Huang

Rongbing Huang

Kennesaw State University - Michael J. Coles College of Business

James G. Tompkins

Kennesaw State University - Michael J. Coles College of Business

Date Written: July 1, 2009

Abstract

We study the role of corporate governance in abnormal returns around announcements of seasoned equity offerings (SEOs) by publicly traded U. S. firms from 2001 - 2004. We find that investors react more positively for firms in which different people hold the CEO and board chairman positions. We also find limited evidence that investor reaction is more positive when the board has a greater representation of outside directors, the CEO has less ownership, and the board is not too large. Our findings suggest that investors react more favorably to SEOs by firms with stronger corporate governance mechanisms that reduce adverse selection or agency problems.

Keywords: SEO, Announcement Effect, Corporate Governance, CEO Power, CEO Duality, CEO Ownership, Board of Directors, Board Effectiveness, Board Independence

JEL Classification: G14, G34

Suggested Citation

Huang, Rongbing and Tompkins, James G., Corporate Governance and Investor Reactions to Seasoned Equity Offerings (July 1, 2009). Available at SSRN: https://ssrn.com/abstract=1433359 or http://dx.doi.org/10.2139/ssrn.1433359

Rongbing Huang (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

560 Parliament Garden Way
Mail Drop #0403
Kennesaw, GA 30144
United States

James G. Tompkins

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Department of Economics and Finance
Kennesaw, GA 30144
United States
770-499-3326 (Phone)
770-499-3209 (Fax)

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