ETF Ownership and Seasoned Equity Offerings

Abstract

This paper investigates the impact of ETF ownership on seasoned equity offerings (SEOs). We find that increases to firms’ ETF ownership is positively related to their propensity to conduct an SEO. ETF ownership is also associated with less negative SEO announcement returns, smaller discounts, and better long-run stock returns. Our evidence is consistent with equity issuance following investor demand for stocks driven by greater participation in ETFs, suggesting a possible alternative source of market timing opportunity.

Keywords: ETF Ownership, Seasoned Equity Offerings, SEO Propensity, Post-Issue Performance

JEL Classification: G11, G32