Post-Earnings Announcement Drift Around the Time of Equity Offerings
Posted: 13 Sep 1999
Date Written: April 1994
This paper examines delayed market reactions to previously reported earnings during periods of equity financing. Increased regulatory and legal burdens during the time interval surrounding the equity offering and management's incentives to minimize the cost of capital may lead to an increase in firm specific information available to the market before the financing occurs. This information may cause stock prices to adjust to the value implications of prior period's earnings before the equity offering. The results indicate that returns after the offering are significantly and positively related to the unexpected portion of earnings announced before the offering. This relation is not significantly different from the unexpected earnings/returns found during a period of no financing.
JEL Classification: G1
Suggested Citation: Suggested Citation