46 Pages Posted: 11 Jul 2002
Date Written: June 2002
We examine long-run stock and operating performance following secondary equity offerings. For a subsample of secondary issuers in which the seller is an insider, both three- and five-year post-issue abnormal stock returns are significantly negative. The findings are robust to alternative long-run abnormal return measurement methodologies. The abnormal returns are large relative to the initial market reaction (mean and median five-year abnormal returns of -33.33% and -73.80%, respectively). The operating performance of these firms also declines subsequent to the issue. This supports the hypothesis that the negative performance of secondary equity offerings can be attributed to managers exploiting "windows of opportunity" by issuing overvalued shares.
Keywords: secondary equity issues, long-run performance
JEL Classification: G32
Suggested Citation: Suggested Citation
Dunbar, Craig G. and Clarke, Jonathan and Kahle, Kathleen M., The Long-Run Performance of Secondary Equity Issues: A Test of the Windows of Opportunity Hypothesis (June 2002). Available at SSRN: https://ssrn.com/abstract=316565 or http://dx.doi.org/10.2139/ssrn.316565