An Analysis of Closed-End Fund Seasoned Equity Offerings
Posted: 30 Jun 2002
We examine the stock price reaction to seasoned equity offerings (SEOs) of closed-end funds and the determinants of the issuance decision. We find that sample funds have negative and significant average announcement-day returns that are less than the returns associated with industrial firm SEOs, most likely because funds have fewer information asymmetries. Issuing funds have higher pre-issue returns, higher premiums, lower betas, and lower three-year, post-issue returns than nonissuing funds. The results of the study are consistent with the argument that fund managers time issues to take advantage of mean reversion in fund returns.
JEL Classification: G14
Suggested Citation: Suggested Citation