Is the Abnormal Return Following Equity Issuances Anomalous?

Rodney L. White Center Working Paper No. 02-99

Posted: 12 Feb 1999

See all articles by Alon Brav

Alon Brav

Duke University - Fuqua School of Business

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)

Abstract

We investigate the robustness of the long-term 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 similarly to nonissuing firms matched on the basis of firm size and book-to-market ratios. 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., Is the Abnormal Return Following Equity Issuances Anomalous?. Rodney L. White Center Working Paper No. 02-99. Available at SSRN: https://ssrn.com/abstract=146469

Alon Brav

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-2908 (Phone)
919-684-2818 (Fax)

Christopher Charles Geczy (Contact Author)

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

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 ECARES ULB CP 114
B-1050 Brussels
Belgium

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

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