Long-Run Performance and Insider Trading in Completed and Canceled Seasoned Equity Offerings

27 Pages Posted: 4 Feb 2011

See all articles by Kathleen M. Kahle

Kathleen M. Kahle

University of Arizona - Department of Finance

Craig G. Dunbar

Ivey Business School, Western University

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Date Written: September 3, 2000

Abstract

This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to completed and canceled SEOs, but declines afterward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For canceled SEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in insider trading around SEO filing effect the probability of cancellation. Overall, the evidence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity, and canceling the issue when the market reaction to the announcement eliminates the overvaluation.

Keywords: SEOs, Insider Trading, Long-Run Performance

JEL Classification: G32

Suggested Citation

Kahle, Kathleen M. and Dunbar, Craig G. and Clarke, Jonathan, Long-Run Performance and Insider Trading in Completed and Canceled Seasoned Equity Offerings (September 3, 2000). Journal of Financial and Quantitative Analysis (JFQA), Vol. 36, No. 4, 2001. Available at SSRN: https://ssrn.com/abstract=1754728

Kathleen M. Kahle (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

Craig G. Dunbar

Ivey Business School, Western University ( email )

1255 Western Road
Room 2309
London, Ontario N6G 0N1
Canada
519-661-3716 (Phone)
519-661-3963 (Fax)

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

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