Download this Paper Open PDF in Browser

The Long-Run Performance of Secondary Equity Issues: A Test of the Windows of Opportunity Hypothesis

46 Pages Posted: 11 Jul 2002  

Craig G. Dunbar

Ivey Business School, Western University

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Kathleen M. Kahle

University of Arizona - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 2002

Abstract

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

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

Craig G. Dunbar (Contact Author)

Ivey Business School, Western University ( email )

1255 Western Road
Room 2309
London, Ontario N6G 0N1
Canada
519-661-3716 (Phone)
519-661-3963 (Fax)

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

Kathleen M. Kahle

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

Paper statistics

Downloads
728
Rank
27,953
Abstract Views
2,584