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Determinants and Market Impact of Seasoned Equity Offerings: The Case of A-REITs

30 Pages Posted: 24 Aug 2009 Last revised: 14 Apr 2010

Bwembya Chikolwa

Queensland University of Technology

Jinu Kim

University of New South Wales (UNSW)

Date Written: August 21, 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.

Keywords: A-REITs, Seasoned equity offerings, Market reaction, Global financial crisis

JEL Classification: G14, G19

Suggested Citation

Chikolwa, Bwembya and Kim, Jinu, Determinants and Market Impact of Seasoned Equity Offerings: The Case of A-REITs (August 21, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: or

Bwembya Chikolwa (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
61731384072 (Phone)
61731381170 (Fax)


Jinu Kim

University of New South Wales (UNSW)

Faculty of the Built Environment
Sydney, NSW 2052

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