Equity Issues and Stock Repurchases of Initial Public Offerings

European Financial Management, Forthcoming

44 Pages Posted: 29 Aug 2014

See all articles by Wolfgang Bessler

Wolfgang Bessler

Justus-Liebig-University Giessen

Wolfgang Drobetz

University of Hamburg

Martin Seim

Justus-Liebig-University Giessen

Jan Zimmermann

Justus-Liebig-University Giessen

Multiple version iconThere are 2 versions of this paper

Date Written: June 25, 2014

Abstract

We investigate the financing strategies and valuation effects of 247 IPO firms at the "Neuer Markt" in Germany that either issued additional equity (SEO) or repurchased shares (SRP) within five years after going public. IPOs issuing additional equity exhibit a temporary outperformance before the event, but negative announcement returns and a long-run underperformance. In contrast, repurchasing IPOs experience positive announcement returns and no long-run underperformance. Free cash flow problems, resulting from mandatory equity issuance at the IPO, explain the SRP decision. Our findings for SEOs are consistent with a staged financing strategy, while we find no evidence for market timing.

Keywords: Initial Public Offerings, Share Repurchases, Seasoned Equity Offerings, Valuation Effects

JEL Classification: G32, G35

Suggested Citation

Bessler, Wolfgang and Drobetz, Wolfgang and Seim, Martin and Zimmermann, Jan, Equity Issues and Stock Repurchases of Initial Public Offerings (June 25, 2014). European Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2488526

Wolfgang Bessler (Contact Author)

Justus-Liebig-University Giessen ( email )

Center for Finance and Banking
Licher Strasse 74
Giessen, D-35394
Germany
49-641-9922460 (Phone)
49-641-9922469 (Fax)

HOME PAGE: http://wiwi.uni-giessen.de/home/Bessler/

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Martin Seim

Justus-Liebig-University Giessen ( email )

Erwin Stein Building
Goethestrasse 58
Giessen, 35390
Germany
+49-641-9922462 (Phone)

Jan Zimmermann

Justus-Liebig-University Giessen ( email )

Center for Finance and Banking
Licher Strasse 74
Giessen, 35394
Germany
+49-641-9922464 (Phone)
+49-641-9922469 (Fax)

HOME PAGE: http://wiwi.uni-giessen.de/home/Bessler/

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