Investment-Based Underperformance Following Seasoned Equity Offerings

54 Pages Posted: 25 May 2006  

Evgeny Lyandres

Boston University; Interdisciplinary Center (IDC) Herzliyah

Le Sun

State Street Corporate - State Street Global Advisors

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

Date Written: July 2005

Abstract

Adding a return factor based on capital investment into standard, calendar-time factor regressions makes underperformance following seasoned equity offerings largely insignificant and reduces its magnitude by 37-46%. The reason is that issuers invest more than nonissuers matched on size and book-to-market. Moreover, the low-minus-high investment-to-asset factor earns a significant average return of 0.37% per month. Our evidence suggests that the underperformance results from the negative investment-expected return relation, as predicted by Carlson, Fisher, and Giammarino (2005).

Suggested Citation

Lyandres, Evgeny and Sun, Le and Zhang, Lu, Investment-Based Underperformance Following Seasoned Equity Offerings (July 2005). NBER Working Paper No. w11459. Available at SSRN: https://ssrn.com/abstract=755695

Evgeny Lyandres

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-3582279 (Phone)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

Le Sun

State Street Corporate - State Street Global Advisors ( email )

1 Lincoln Street
Boston, MA 02111
United States

Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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