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

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Date Written: December 6, 2013

Abstract

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

Jindra, Jan, Seasoned Equity Offerings, Valuation, and Timing: Evidence from 1980's and 1990's (December 6, 2013). Quarterly Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=216010 or http://dx.doi.org/10.2139/ssrn.216010

Jan Jindra (Contact Author)

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

44 Montgomery Street
San Francisco, CA 94104
United States

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