scholarly journals The Impact of Cost of Equity on Seasoned Equity Offerings

2013 ◽  
Author(s):  
Weiqi Zhang
Keyword(s):  
Seasoned Equity Offerings ◽  
Cost Of Equity ◽  
Equity Offerings ◽  
The Impact

The Effects of Covenant Violations on the Underpricing of Seasoned Equity Offerings and the Implied Cost of Equity Capital

2016 ◽  
Vol 06 (01) ◽  
pp. 1640003 ◽  
Author(s):  
Anh Ngo ◽  
Hong Duong ◽  
Anthony Chen
Keyword(s):  
Earnings Forecasts ◽  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Equity Offerings ◽  
Negative Effects ◽  
The Impact ◽  
Covenant Violations ◽  
Implied Cost Of Equity

This study examines the impact of covenant violations on the implied cost of equity capital and the underpricing of seasoned equity offerings (SEOs). Using a novel dataset of 1,028 first-time covenant violations from 1996–2011, we find a higher level of SEO underpricing during the period immediately following covenant violations. This suggests that creditors require violating firms to issue equity to lower leverage and that equity investors interpret the violation negatively. We also find that violating firms experience an average increase of 8.48% in the implied cost of equity capital. By comparing analysts’ earnings forecasts before and after the violations, we conclude that the negative effects on equity owe to the loss of flexibility that accompanies covenant violations, and are not simply a reflection of the deteriorating health of the firm.

The long run performance of secondary equity offerings on the Johannesburg Stock Exchange

2018 ◽  
Vol 13 (5) ◽  
pp. 1211-1232
Author(s):  
Jesse Alves da Cunha ◽  
Yudhvir Seetharam
Keyword(s):  
Stock Exchange ◽  
Operating Performance ◽  
Investor Sentiment ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Content Type ◽  
Market Participants ◽  
Johannesburg Stock Exchange ◽  
Long Run ◽  
The Impact

Purpose Opinions have been divided on whether there is a rational explanation to the reason behind seasoned equity offerings (SEOs) or whether the explanation lies within the behavioural intricacies attributed to stock market participants. The paper aims to discuss these issues. Design/methodology/approach This study investigates the long-run performance of firms conducting SEOs on the Johannesburg Stock Exchange (JSE) over the period of 1998–2015, by examining the return performance and operating performance of firms, along with the impact of investor sentiment on these variables. Findings The results of this study are inconsistent with the existing literature, which argues that the long-run performance of issuing firms signalled an initial underreaction to SEOs buoyed by over-optimistic investors. Research limitations/implications Instead, the long-run performance of issuing firms is adequately explained by the rational models centred on the risk-return framework, implying that investors are reacting swiftly to SEOs in an unbiased fashion. Originality/value Investor sentiment does not materially influence the long-run share performance or operating performance of issuing firms, casting doubt on the ability of the market timing theory to explain the long-run performance of SEOs. The authors thus find that SEO performance cannot be explained by behavioural-based reasoning, in contrast to some asset pricing studies on the JSE which indicate the role of sentiment in explaining returns.

scholarly journals Insider Trading and the Classification of Seasoned Equity Offerings: Evidence from Taiwan

2017 ◽  
Vol 9 (5) ◽  
pp. 58 ◽  
Author(s):  
Han-Ching Huang ◽  
Hsiu-Hsin Chiu
Keyword(s):  
Insider Trading ◽  
Abnormal Returns ◽  
Seasoned Equity Offerings ◽  
Growth Potential ◽  
Equity Offerings ◽  
Announcement Effects ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
The Impact

This paper investigates whether insider purchasing or selling before Season equity offerings (SEO) announcement have the impact on the cumulative abnormal returns (CAR) around SEO announcement in Taiwan. We find that there are negative announcement effects around the SEO announcement, which is not consistent with the argument that there are usually positive announcement effects around the SEO announcement in Taiwan. Moreover, long-run abnormal returns following SEOs are negative. Therefore, the motivation of SEO has changed from investment to overvaluation.. Although there is net buying prior to SEO announcement, the outside investors still regard SEO announcement as a signal of overvaluation instead of growth potential.

scholarly journals Shelf versus Traditional Seasoned Equity Offerings: The Impact of Potential Short Selling

2018 ◽  
Vol 54 (3) ◽  
pp. 1285-1311 ◽  
Author(s):  
Marie Dutordoir ◽  
Norman Strong ◽  
Ping Sun
Keyword(s):  
Corporate Finance ◽  
Seasoned Equity Offerings ◽  
Short Selling ◽  
Equity Offerings ◽  
Sensitivity Tests ◽  
The Impact

Traditional seasoned equity offerings (SEOs) elicit short selling from traders trying to increase offering discounts. Such short selling is more difficult for shelf offerings because the time between their announcement and issuance tends to be shorter. We predict and find that firms with higher short-selling potential (SSP) are more likely to choose shelf over traditional SEOs. This result is robust to alternative proxies for SSP and other sensitivity tests. Further analysis suggests that shelf issuers aim to mitigate the threat of manipulative short selling. Our findings add to a growing literature showing that short selling has a real impact on corporate finance decisions.

The Impact of IPOs’ Analyst Coverage on the Choice and Timing of SEOs

2018 ◽  
pp. 330-358
Author(s):  
Nesrine Bouzouita ◽  
Carole Gresse
Keyword(s):  
Survival Analysis ◽  
Initial Public Offerings ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Analyst Coverage ◽  
Public Offerings ◽  
Firm Commitment ◽  
The Impact

Based on a survival analysis on a sample of initial public offerings (IPOs) undertaken on Euronext and their subsequent seasoned equity offerings (SEOs) over the period 1995–2012, this chapter shows that analyst coverage in the months following an IPO facilitates subsequent SEOs and favors the longevity of the firm’s relationship with its initial underwriter. SEOs are facilitated in several dimensions: post-IPO analyst coverage increases the likelihood of the IPO firm to conduct an SEO with a firm commitment underwriting; it increases the occurrence speed of that SEO; and it increases the probability of that SEO to be intermediated by the same underwriter as the IPO.

The effect of outside blockholders on earnings management around seasoned equity offerings in French listed companies on the SBF120

2019 ◽  
Vol 17 (3) ◽  
pp. 449-467
Author(s):  
Abir Jerbi Maatougui ◽  
Khamoussi Halioui
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Seasoned Equity Offerings ◽  
Empirical Literature ◽  
Individual Investors ◽  
Equity Offerings ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to test the effect of the presence of outside blockholders on earnings management around seasoned equity offerings (SEOs). Design/methodology/approach Given that SEO can be one of motivations for earnings management, the authors examined the role of outside blockholders in monitoring the opportunistic behavior of managers around 50 SEOs realized by 45 French companies during the 2005-2009 period based on panel data model. Findings The authors found that issuing firms are used for upward earnings management during the pre-offering period. Indeed, the discretionary accruals know a continuous evolution during the three years preceding SEO and peaked in the year prior to the SEO. This result led us to examine the role played by the outside blockholders on earnings management. The results provided empirical evidence that the presence of outside blockholders in SEO firms is able to restrain earnings management practices. Research limitations/implications This study allows to inform investors that French issuing firms are less overvalued in the presence of outside blockholders than in their absence. As a result, investors have an interest in participating in the SEO of firms that hold outside blockholders in their capital structure. Again, based on this study, users of financial statements can trust the reliability of the financial statements published by companies with outside blockholders because of the careful control exercised by these shareholders in the process of producing financial information. However, similar to how any research may suffer from some limitations, this work has two major limitations. Firstly, the authors examined the impact of outside blockholders on earnings management without distinguishing between the different types of blockholders (such as individual investors, pension funds, mutual funds, banks and trusts). Secondly, they have estimated the discretionary accruals by referring to a single model (Kothari et al., 2007). However, the use of two or more models for estimating accruals will lead to more robust results. Originality/value The empirical literature emphasizes the monitoring role played by these shareholders on earnings management. However, it does not distinguish between the circumstances when the monitors either lose or win from exaggerations. This research completes this lack by studying the impact of outside blockholders on earnings management around SEOs.

scholarly journals Insider Trading and Institutional Holdings in Seasoned Equity Offerings

2018 ◽  
Vol 11 (3) ◽  
pp. 53 ◽  
Author(s):  
Ching-Chih Wu ◽  
Tung-Hsiao Yang
Keyword(s):  
Insider Trading ◽  
Institutional Investors ◽  
Explanatory Power ◽  
Spillover Effects ◽  
Seasoned Equity Offerings ◽  
Trading Behavior ◽  
Equity Offerings ◽  
Institutional Holdings ◽  
Insider Trades ◽  
The Impact

We investigate three issues about the impact of insider trades and institutional holdings on seasoned equity offerings (SEOs). First, we test how insider trades affect the trading behavior of institutional investors in SEOs. Second, we test whose trading behavior, either insiders or institutional investors, has greater explanatory power for the performance of SEO firms after issuing new stocks. Third, we analyze the industry-wide spillover effects of insider trades and institutional holdings. Empirically, we find that insiders and institutional investors of SEO firms may utilize similar information in their transactions because insider trades induce similar trading behavior for institutional investors. In addition, insider trades, relative to institutional holdings, have greater explanatory power for SEO firm’s long-term performance. Finally, compared with insider trades, institutional holdings have a more significant spillover effect in the industry of SEO firms.

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