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An Analysis of Closed‐end Fund Seasoned Equity Offerings

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  • Eric James Higgins
  • Shawn Howton
  • Shelly Howton

Abstract

We examine the stock price reaction to seasoned equity offerings (SEOs) of closed‐end funds and the determinants of the issuance decision. We find that sample funds have negative and significant average announcement‐day returns that are less than the returns associated with industrial firm SEOs, most likely because funds have fewer information asymmetries. Issuing funds have higher pre‐issue returns, higher premiums, lower betas, and lower three‐year, post‐issue returns than nonissuing funds. The results of the study are consistent with the argument that fund managers time issues to take advantage of mean reversion in fund returns.

Suggested Citation

  • Eric James Higgins & Shawn Howton & Shelly Howton, 2003. "An Analysis of Closed‐end Fund Seasoned Equity Offerings," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(2), pages 243-257, June.
    • Handle: RePEc:bla:jfnres:v:26:y:2003:i:2:p:243-257
    DOI: 10.1111/1475-6803.00057
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    Cited by:

    1. Emmanouil Mavrakis, 2011. "Abnormal Returns on CEFs and in Pre-and-Post-Credit-Crunch Periods," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 55-70.

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