The Timing and Consequences of Seasoned Equity Offerings: A Regression Discontinuity Approach

57 Pages Posted: 26 Nov 2017 Last revised: 25 Aug 2019

See all articles by Amy K. Dittmar

Amy K. Dittmar

University of Michigan at Ann Arbor - The Stephen M. Ross School of Business

Ran Duchin

University of Washington - Michael G. Foster School of Business

Shuran Zhang

The Hong Kong Polytechnic University

Date Written: August 25, 2018

Abstract

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

Dittmar, Amy and Duchin, Ran and Zhang, Shuran, The Timing and Consequences of Seasoned Equity Offerings: A Regression Discontinuity Approach (August 25, 2018). Available at SSRN: https://ssrn.com/abstract=3077039 or http://dx.doi.org/10.2139/ssrn.3077039

Amy Dittmar

University of Michigan at Ann Arbor - The Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-3108 (Phone)

HOME PAGE: http://webuser.bus.umich.edu/adittmar/

Ran Duchin (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Shuran Zhang

The Hong Kong Polytechnic University ( email )

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