Capital structure adjustment and market reaction following seasoned equity offerings

2019 ◽  
Vol 25 (3) ◽  
pp. 388-411
Author(s):  
Faiza Asad ◽  
Saqib Gulzar ◽  
Kenbata Bangassa ◽  
Majid Jamal Khan
Keyword(s):  
Capital Structure ◽  
Market Reaction ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Structure Adjustment

Anchoring on Historical High Prices and Seasoned Equity Offerings

2019 ◽  
Vol 55 (8) ◽  
pp. 2588-2612
Author(s):  
Armen Hovakimian ◽  
Huajing Hu
Keyword(s):  
Stock Price ◽  
Market Reaction ◽  
Seasoned Equity Offerings ◽  
Reference Points ◽  
High Price ◽  
Equity Offerings ◽  
Seasoned Equity Offering ◽  
Financing Decisions ◽  
Price Reference ◽  
Equity Offering

We document that firms’ financing decisions are affected by historical high prices. The ratio of the monthly high price to the 12-month historical high price positively affects the probability of a seasoned equity offering (SEO). Furthermore, the postannouncement market reaction is muted and the offering discount is smaller if the preannouncement stock price is high relative to its historical high price. The results suggest that historical high price reference points may help managers rationally time SEOs to take advantage of market reception and minimize issuance costs.

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