An Analysis of Closed-End Fund Seasoned Equity Offerings

Posted: 30 Jun 2002

See all articles by Eric James Higgins

Eric James Higgins

Kansas State University - College of Business Administration

Shelly Howton

Villanova University - School of Business

Shawn D. Howton

Villanova University - Department of Finance

Abstract

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

Higgins, Eric James and Howton, Shelly W. and Howton, Shawn D., An Analysis of Closed-End Fund Seasoned Equity Offerings. Available at SSRN: https://ssrn.com/abstract=314242

Eric James Higgins (Contact Author)

Kansas State University - College of Business Administration ( email )

117 D Calvin Hall
Manhattan, KS 66506
United States
(785)-532-3936 (Phone)

Shelly W. Howton

Villanova University - School of Business ( email )

Dept. of Finance
Villanova, PA 19085
United States
610-519-6111 (Phone)
610-519-6881 (Fax)

Shawn D. Howton

Villanova University - Department of Finance ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States

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