The Timing and Consequences of Seasoned Equity Offerings: A Regression Discontinuity Approach
57 Pages Posted: 26 Nov 2017 Last revised: 25 Aug 2019
Date Written: August 25, 2018
The likelihood of seasoned equity offerings (SEOs) jumps discontinuously when the stock price equals the most recent equity offer price. Anchoring on the last offer price holds after considering executive turnovers, stock splits, earnings management, or dividend adjustments. Using a fuzzy regression discontinuity design around this cutoff, which exploits local randomness in stock prices, we investigate the consequences of anchoring in SEOs. We find significant increases in cash holdings and acquisitions of lower quality, with no real effects on investment or employment. Overall, we provide some of the cleanest estimates, to date, of the timing and causal effects of SEOs.
Keywords: anchoring, cash, real effects, investment, behavioral finance
JEL Classification: G30, G31, G32
Suggested Citation: Suggested Citation