Market Reaction, Revised Proceeds, and the Classification of Seasoned Equity Offerings

57 Pages Posted: 21 Mar 2011 Last revised: 2 Jan 2012

See all articles by Konan Chan

Konan Chan

National Chengchi Unversity (NCCU) - Finance

Nandkumar Nayar

Lehigh University - College of Business & Economics

Ajai K. Singh

Department of Finance, University of Central Florida

Wen Yu

University of St. Thomas - Opus College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 23, 2011

Abstract

Registrations of SEOs serve to galvanize information gathering about issuers. We posit that market reaction to new information influences issuers’ decision about their final offer size. The offer size relative to the amount filed initially is a parsimonious measure which helps predict subsequent firm performance. Improved offerings, whose offer size exceeds the amount registered originally, record significantly positive price reaction on the offer date and do not underperform post-issuance. Conversely their complement, Regular offers, experience significantly negative reaction on the offer date and underperform their benchmark following issuance. Improved SEO firms make relatively higher investments and generate stronger institutional demand.

Keywords: SEOs, Market Timing, Managerial Response, Market Reaction during Registration

JEL Classification: G14, G32, G39

Suggested Citation

Chan, Konan and Nayar, Nandkumar and Singh, Ajai K. and Yu, Wen, Market Reaction, Revised Proceeds, and the Classification of Seasoned Equity Offerings (December 23, 2011). AFA 2012 Chicago Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1787027 or http://dx.doi.org/10.2139/ssrn.1787027

Konan Chan

National Chengchi Unversity (NCCU) - Finance ( email )

No. 64, Chih-Nan Road
Section 2
Taipei, 11623
Taiwan
+886-2-29393091 ext 81239 (Phone)

Nandkumar Nayar

Lehigh University - College of Business & Economics ( email )

621 Taylor Street, Rauch Business Center
Lehigh University
Bethlehem, PA 18015-3117
United States
610-758-4161 (Phone)
610-758-6429 (Fax)

Ajai K. Singh (Contact Author)

Department of Finance, University of Central Florida ( email )

College of Business Administration
12744 Pegasus Drive
Orlando, FL 32816
United States
407-823-0761 (Phone)
407-823-6676 (Fax)

Wen Yu

University of St. Thomas - Opus College of Business ( email )

2115 Summit Avenue
St. Paul, MN 55105
United States
651-962-5428 (Phone)
651-962-5093 (Fax)

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