The Long-Run Performance of Firms that Withdraw Seasoned Equity Offerings

32 Pages Posted: 8 Feb 1998

See all articles by Brian L. Betker

Brian L. Betker

Saint Louis University

Michael J. Alderson

Saint Louis University - Richard A. Chaifetz School of Business

Date Written: November 1997

Abstract

We examine the long-run stock price and operating performance of companies that withdraw seasoned equity offerings. Firms that withdraw an offering provide an opportunity to examine the long-run impact of the intent to issue shares, independent of any agency problems that might be intensified by the actual acquisition of equity capital. As in completed SEOs, long-horizon stock returns to sample firms are substantially lower than returns to control firms. Long-run operating performance is similarly poor. Long run stock price performance is worst among high market-to-book assets firms that withdraw equity issues in hot SEO markets. The evidence is consistent with a model in which firms attempt to sell overvalued shares to a market that doesn't react sufficiently to the implications of the action, even if the shares are not actually issued.

JEL Classification: G32, G14

Suggested Citation

Betker, Brian L. and Alderson, Michael J., The Long-Run Performance of Firms that Withdraw Seasoned Equity Offerings (November 1997). Available at SSRN: https://ssrn.com/abstract=57942 or http://dx.doi.org/10.2139/ssrn.57942

Brian L. Betker (Contact Author)

Saint Louis University ( email )

St. Louis, MO 63108-3397
United States

Michael J. Alderson

Saint Louis University - Richard A. Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States
314-977-8169 (Phone)
314-977-3897 (Fax)

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