Institutional Shareholders and SEO Market Timing

38 Pages Posted: 16 Mar 2013 Last revised: 15 Sep 2015

See all articles by Armen Hovakimian

Armen Hovakimian

Baruch College - Zicklin School of Business

Huajing Hu

Adelphi University

Date Written: August 27, 2015


Pecking order and market timing theories assume that corporate financing decisions are made in the interests of existing shareholders. We find that existing institutional investors, on average, significantly increase their share ownership at the time of the SEO, including SEOs that would be classified as overpriced based on ex-ante measures of mispricing, such as pre-issue returns and market-to-book ratios. We further find that higher pre-existing institutional shareholdings lead to less SEO timing. Overall, the results question whether firms engage in equity timing to benefit existing shareholders at the expense of investors buying shares in the SEOs.

Keywords: SEO, equity issue, market timing, institutional ownership

JEL Classification: G30, G32

Suggested Citation

Hovakimian, Armen and Hu, Huajing, Institutional Shareholders and SEO Market Timing (August 27, 2015). Available at SSRN: or

Armen Hovakimian (Contact Author)

Baruch College - Zicklin School of Business ( email )

One Bernard Baruch Way
Box B10-225
New York, NY 10010
United States
646-312-3490 (Phone)
646-312-3451 (Fax)


Huajing Hu

Adelphi University ( email )

1 South Ave
Garden City, NY NY 11530
United States

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