Banks’ Seasoned Equity Offerings Announcements and Central Bank Lending Operations
26 Pages Posted: 29 Aug 2022
Date Written: August 29, 2022
Abstract
This paper studies the influence of central bank lending operations on the announcement effects of European banks’ seasoned equity offerings (SEOs). We find that larger participation in lending operations is associated with more negative cumulative abnormal returns following the announcement. This result supports the hypothesis that SEOs made by banks that rely more on central bank lending facilities show more negative signaling effects. However, these effects are short-lived and fade away after two trading days following the SEO announcement. Further, we find that offerings motivated by capital strengthening are more likely to signal overpriced equity.
Keywords: Banks; Bank capital; Seasoned equity offerings; Unconventional monetary policy
JEL Classification: E52, E58, G14, G21
Suggested Citation: Suggested Citation