Seasoned Equity Offerings and the Cost of Market Timing

2011 ◽  
Author(s):  
Eric Duca
Keyword(s):  
Market Timing ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
The Cost

Seasoned equity offerings, market timing, and the corporate lifecycle

2010 ◽  
Vol 95 (3) ◽  
pp. 275-295 ◽  
Author(s):  
Harry DeAngelo ◽  
Linda DeAngelo ◽  
René M. Stulz
Keyword(s):  
Market Timing ◽  
Seasoned Equity Offerings ◽  
Equity Offerings

scholarly journals Fundamentals, Market Timing, and Seasoned Equity Offerings

2007 ◽  
Author(s):  
Harry DeAngelo ◽  
Linda DeAngelo ◽  
René Stulz
Keyword(s):  
Market Timing ◽  
Seasoned Equity Offerings ◽  
Equity Offerings

Underpricing and market timing in SEOs of European REITs and REOCs

2019 ◽  
Vol 38 (3) ◽  
pp. 163-180
Author(s):  
Felix Lorenz
Keyword(s):  
Real Estate ◽  
Lower Cost ◽  
Market Timing ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Real Estate Investment ◽  
Content Type ◽  
Price Discounts ◽  
Property Companies ◽  
Practical Implications

Purpose The purpose of this paper is to contribute to the literature on seasoned equity offerings (SEOs) by examining the underpricing of European real estate corporations and identifying determinants explaining the phenomenon of setting the offer price at a discount at SEOs. Design/methodology/approach With a sample of 470 SEOs of European real estate investment trusts (REITs) and real estate operating companies (REOCs) from 2004 to 2018, multivariate regression models are applied to test for theories on the pricing of SEOs. This paper furthermore tests for differences in underpricing for REITs and REOCs as well as specialized and diversified property companies. Findings Significant underpricing of 3.06 percent is found, with REITs (1.90 percent) being statistically less underpriced than REOCs (5.08 percent). The findings support the market timing theory by showing that managers trying to time the equity market gain from lower underpricing. Furthermore, underwritten offerings are more underpriced to reduce the risk of the arranging bank, but top-tier underwriters are able to reduce offer price discounts by being more successful in attracting investors. The results cannot support the value uncertainty hypothesis, but they are in line with placement cost stories. In addition, specialized property companies are subject to lower underpricing. Practical implications An optimal issuance strategy taking into account timing, relative offer size and the choice of the underwriter can minimize the amount of “money left on the table” and therefore contribute to the lower cost of raising capital. Originality/value This is the first study to investigate SEO underpricing for European real estate corporations, pricing differences of REITs and REOCs in seasoned offerings and the effect of market timing on the pricing of SEOs.

scholarly journals The Relationship between Earnings Management and Equity Market Timing

2021 ◽  
Vol 25 (6) ◽  
Author(s):  
Matheus da Costa Gomes ◽  
João Paulo Augusto Eça ◽  
Marcelo Botelho da Costa Moraes ◽  
Maurício Ribeiro do Valle
Keyword(s):  
Earnings Management ◽  
Market Timing ◽  
Careful Analysis ◽  
Seasoned Equity Offerings ◽  
Equity Market ◽  
Net Income ◽  
Equity Offerings ◽  
The Relationship ◽  
Profitability Ratios ◽  
Equity Market Timing

ABSTRACT Objective: this study aims to verify if companies that practice equity market timing have higher earnings management levels around the stock issue period. Method: we used a sample of 68 seasoned equity offerings (SEOs) in Brazil from 2004-2015. First, we ranked the sample among companies that used market timing (timers) behavior in the SEOs and those that did not (non-timers). Second, we estimated each company’s earnings management levels by the Modified Jones and Modified Jones with ROA models. Finally, we tested the relationship between earnings management and equity market timing using a linear regression model. Results: the results show that the timers managed earnings more intensively in the quarters around SEOs than the non-timers. This happens to increase net income and consequently improve profitability ratios. Therefore, to explore opportunity windows, managers can inflate accounting profit through accruals and influence the market’s ability to correctly price shares. Conclusion: Brazilian companies practice earnings management as a way of exploiting opportunity windows in the stock market. The conclusion reinforces the need for a careful analysis of the company’s profits by investors, analysts, auditors, and regulators while allowing efforts to avoid such practices through compliance, governance, and regulation.

The Role of Internal Control in the Equity Issue Market: Evidence From Seasoned Equity Offerings

2015 ◽  
Vol 32 (3) ◽  
pp. 303-328 ◽  
Author(s):  
Xinghua Gao ◽  
Yonghong Jia
Keyword(s):  
Internal Control ◽  
Risk Premium ◽  
Dominant Role ◽  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Equity Offerings ◽  
Equity Issue ◽  
Sarbanes Oxley ◽  
The Cost

This article examines the role of internal control requirements under the Sarbanes–Oxley (SOX) Act of 2002 in firms’ cost of raising equity capital. We find that, prior to the disclosure of internal control weaknesses (ICWs), ICWs are not directly associated with underwriters’ gross spread and seasoned equity offering (SEO) underpricing. After the disclosure, however, underwriters charge a risk premium on ICW issuers, especially on those disclosing ICWs in multiple consecutive years. We also find that SEO underpricing is exacerbated by multiple-year-disclosed ICWs but not by first-timers. More notably, we find that managers play a dominant role in deciding issue size pre-disclosure, but this dominance weakens post-disclosure. Taken together, our evidence suggests that internal controls help moderate the cost of raising equity capital and that ICW disclosures have significant implications for underwriters in the equity issue market.

scholarly journals Does Financial Market Structure Affect the Cost of Raising Capital?

2020 ◽  
pp. 1-38
Author(s):  
James Brugler ◽  
Carole Comerton-Forde ◽  
Terrence Hendershott
Keyword(s):  
New York ◽  
Market Structure ◽  
Stock Exchange ◽  
Seasoned Equity Offerings ◽  
Trading Costs ◽  
Equity Offerings ◽  
Institutional Trading ◽  
York Stock Exchange ◽  
The One ◽  
The Cost

Abstract We provide evidence on market structure and the cost of raising capital by examining changes in market structure in U.S. equity markets. Only the Order Handling Rules (OHR) of the Nasdaq, the one reform that reduced institutional trading costs, lowered the cost of raising capital. Using a difference-in-differences framework relative to the New York Stock Exchange (NYSE) that exploits the OHR’s staggered implementation, we find that the OHR reduced the underpricing of seasoned equity offerings by 1–2 percentage points compared with a pre-OHR average of 3.6%. The effect is the largest in stocks with the largest reduction in institutional trading costs after the OHR.

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