Seasoned Equity Issuers’ Prospectus Filings: How Informative Are the Tones?

97 Pages Posted: 4 Nov 2020

See all articles by Rongbing Huang

Rongbing Huang

Kennesaw State University - Michael J. Coles College of Business

Hong Qian

Oakland University - Department of Accounting and Finance

Santhosh Ramalingegowda

University of Georgia - Terry College of Business

Date Written: September 17, 2020

Abstract

Seasoned equity issuers file Forms S and 424B with the Securities and Exchange Commission. We find that weak-modal tones of these filings are positively related to offer price discounts and negatively related to offer-day stock returns. Increases in cautionary tones from the initial S filing to the 424B filing are associated with lower abnormal stock returns after the offer date. However, we find no significant evidence that cautionary filing tones are related to underpricing. Overall, our findings suggest that cautionary tones of seasoned equity issuers’ prospectus filings have significant negative information content, which is gradually incorporated into the stock prices.

Keywords: Textual Analysis, Filing Tone, Security Issuance, Equity Issuance, Seasoned Equity Offering, SEO, Offer Price Discount, Underpricing, Corporate Disclosure, Risk Disclosure

JEL Classification: G14; G18; G24

Suggested Citation

Huang, Rongbing and Qian, Hong and Ramalingegowda, Santhosh, Seasoned Equity Issuers’ Prospectus Filings: How Informative Are the Tones? (September 17, 2020). Available at SSRN: https://ssrn.com/abstract=3694659 or http://dx.doi.org/10.2139/ssrn.3694659

Rongbing Huang (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

560 Parliament Garden Way
Mail Drop #0403
Kennesaw, GA 30144
United States

Hong Qian

Oakland University - Department of Accounting and Finance ( email )

347 Elliott Hall
275 Varner Dr.
Rochester, MI 48309
United States

Santhosh Ramalingegowda

University of Georgia - Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States
706-542-3612 (Phone)

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