Seasoned Equity Offerings, Valuation, and Timing: Evidence from 1980's and 1990's
Quarterly Journal of Finance, Forthcoming
45 Pages Posted: 31 Mar 2000 Last revised: 20 May 2014
Date Written: December 6, 2013
While the existing literature has focused on whether firms issue equity when they are overvalued, this paper examines whether there was a better time to issue seasoned equity when the valuation of a firm’s shares might have been even more favorable. Using three valuation approaches the findings suggest that: (1) the valuation of firms issuing seasoned equity is the most favorable at the time of the offering and (2) the estimated valuation errors are significantly related to the probability that firms will undertake a seasoned equity issue. These results are consistent with firms optimizing the timing of the seasoned equity offering so as to take maximum possible advantage of misvaluation of their shares.
Keywords: SEO, valuation, asymmetric information
JEL Classification: G31, G32
Suggested Citation: Suggested Citation