Seos in a 'Hot Market': Evidence of Timing

Posted: 27 Jun 2006 Last revised: 23 Aug 2008

See all articles by Sandra Cohen

Sandra Cohen

Athens University of Economics and Business - Department of Business Administration

Aphroditi J. Papadaki

Athens University of Economics and Business - Department of Accounting and Finance

Georgia Siougle

Athens University of Economics and Business - Department of Accounting and Finance

Abstract

This study analyzes the financing decision of raising equity through a rights issue in a developing market, the Athens Stock Exchange, during a particular emerging period. Specifically, this study examines the information content of accounting items derived from published financial statements the year prior to a "hot" period in explaining post issue stock price performance. We are using data from listed companies in the Athens Stock Exchange (ASE) during the "hot period" of year 1999 when stock prices burst and an unusual large number of seasoned equity offerings (SEOs) took place. Our empirical results do not verify a statistically significant relationship between discretionary accruals in the year preceding the issue and post issue stock returns. Moreover, historical accounting items do not provide value relevant information and cannot be used to explain post issue stock returns. Market trend prior to the issuing is proved to be the only significant variable in explaining post SEO returns. The overall findings are in line with the market timing theory which claims that managers just time their equity issues in an up-ward moving market in order to increase the offering proceeds.

Keywords: Athens Stock Exchange, Seasoned Equity Offerings, Market Timing

JEL Classification: G14, G15, M41

Suggested Citation

Cohen, Sandra and Papadaki, Aphroditi J. and Siougle, Georgia, Seos in a 'Hot Market': Evidence of Timing. Applied Financial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=911900

Sandra Cohen

Athens University of Economics and Business - Department of Business Administration ( email )

Athens
Greece
+302108203168 (Phone)
+302108203164 (Fax)

Aphroditi J. Papadaki

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Georgia Siougle (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

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