The Impact of Regulation on Information Quality and Performance Around Seasoned Equity Offerings: International Evidence

53 Pages Posted: 3 May 2017

See all articles by Larry Fauver

Larry Fauver

University of Tennessee, Knoxville - Department of Finance; University of Tennessee

Gilberto R. Loureiro

University of Minho - School of Economics and Management

Alvaro G. Taboada

Mississippi State University

Date Written: February 2017

Abstract

We examine the impact of the enactment of the Market Abuse Directive (MAD) and the Prospectus Directive (PD) across 18 EU countries on seasoned equity offerings (SEOs). Using a difference-in-differences methodology, we document a significant reduction in earnings management, improved post-SEO stock return performance, and a decline in the adverse reaction to SEO announcements following the enactment of MAD. We find similar, albeit weaker, results post-PD. The impact is stronger in countries with high ex-ante institutional quality. Our results suggest that the enactment of these directives leads to improvements in information quality, which reduces information asymmetry around SEOs.

Keywords: Seasoned equity offerings; capital market regulation; earnings management

JEL Classification: F30, G15, G18, G30, K22

Suggested Citation

Fauver, Larry and Loureiro, Gilberto R. and Taboada, Alvaro G., The Impact of Regulation on Information Quality and Performance Around Seasoned Equity Offerings: International Evidence (February 2017). Journal of Corporate Finance, Vol. 44, 2017, Available at SSRN: https://ssrn.com/abstract=2962388

Larry Fauver

University of Tennessee, Knoxville - Department of Finance ( email )

424 Stokely Management Center
Knoxville, TN 37996
United States

University of Tennessee ( email )

424 Stokely Management Center
Department of Finance
Knoxville, TN 37996-0540
United States
865-974-1722 (Phone)
865-974-1716 (Fax)

Gilberto R. Loureiro

University of Minho - School of Economics and Management ( email )

Campus Gualtar
Braga, 4710-057
Portugal
+351-253-605553 (Phone)
+351-253-601380 (Fax)

Alvaro G. Taboada (Contact Author)

Mississippi State University ( email )

310-H McCool Hall
PO Box 9580
Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

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