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Differences in the information environment prior to seasoned equity offerings under relaxed disclosure regulation

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  • Clinton, Sarah B.
  • White, Joshua T.
  • Woidtke, Tracie

Abstract

The SEC promulgated the Securities Offering Reform (SOR) in 2005 to ease disclosure restrictions prior to seasoned equity offerings (SEOs). The SEC argued that SOR would improve the information environment, but critics claimed it would allow firms to hype their stock. This paper is the first to examine the information environment at the time of capital formation under SOR. We find more frequent and accurate management earnings forecasts, more 8-K filings, greater absolute market-adjusted returns, and more positive stock returns leading up to the SEO issue date indicating a richer pre-SEO information environment with capital formation benefits after SOR.

Suggested Citation

  • Clinton, Sarah B. & White, Joshua T. & Woidtke, Tracie, 2014. "Differences in the information environment prior to seasoned equity offerings under relaxed disclosure regulation," Journal of Accounting and Economics, Elsevier, vol. 58(1), pages 59-78.
    • Handle: RePEc:eee:jaecon:v:58:y:2014:i:1:p:59-78
    DOI: 10.1016/j.jacceco.2014.05.002
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    Cited by:

    1. Jun Chen & Ningzhong Li & Xiaolu Zhou, 2023. "Equity financing incentive and corporate disclosure: new causal evidence from SEO deregulation," Review of Accounting Studies, Springer, vol. 28(2), pages 1003-1034, June.
    2. Paul Borochin & Chinmoy Ghosh & Di Huang, 2019. "Target information asymmetry and takeover strategy: Insights from a new perspective," European Financial Management, European Financial Management Association, vol. 25(1), pages 38-79, January.
    3. Sharad Asthana & Rachana Kalelkar, 2020. "Impact of economic policy uncertainty on disclosure and pricing of earnings news," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1481-1512, November.
    4. Cristián Pinto, 2015. "The Effect of Investor Attention on the Pricing of Seasoned Equity Offerings," Serie Working Papers 20, Universidad del Desarrollo, School of Business and Economics.
    5. Sharad Asthana & Rachana Kalelkar, 0. "Impact of economic policy uncertainty on disclosure and pricing of earnings news," Review of Quantitative Finance and Accounting, Springer, vol. 0, pages 1-32.
    6. Hemmings, Danial & Hodgkinson, Lynn & Wang, Qingwei, 2018. "Heterogeneous effects of the SEC’s Securities Offering Reform," Economics Letters, Elsevier, vol. 170(C), pages 131-135.
    7. Hibbert, Ann Marie & Kang, Qiang & Kumar, Alok & Mishra, Suchi, 2020. "Heterogeneous beliefs and return volatility around seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 137(2), pages 571-589.
    8. Susan Chaplinsky & Kathleen Weiss Hanley & S. Katie Moon, 2017. "The JOBS Act and the Costs of Going Public," Journal of Accounting Research, Wiley Blackwell, vol. 55(4), pages 795-836, September.
    9. Michael Dambra & Bryce Schonberger & Charles Wasley, 2024. "Creating visibility: voluntary disclosure by private firms pursuing an initial public offering," Review of Accounting Studies, Springer, vol. 29(3), pages 2468-2517, September.
    10. Shroff, Nemit & Verdi, Rodrigo S. & Yost, Benjamin P., 2017. "When does the peer information environment matter?," Journal of Accounting and Economics, Elsevier, vol. 64(2), pages 183-214.
    11. Jae B. Kim, 2016. "Accounting flexibility and managers’ forecast behavior prior to seasoned equity offerings," Review of Accounting Studies, Springer, vol. 21(4), pages 1361-1400, December.
    12. Bayar, Onur & Das, Sougata & Kesici, Emre, 2021. "Heterogeneity in the information content of 8-K disclosures about private targets: Acquirer size and target significance," Global Finance Journal, Elsevier, vol. 48(C).
    13. Allen H. Huang & Jianghua Shen & Amy Y. Zang, 2022. "The unintended benefit of the risk factor mandate of 2005," Review of Accounting Studies, Springer, vol. 27(4), pages 1319-1355, December.
    14. Gao, Shenghao & Liu, Jinzhao & Zhang, Qi & Zhou, Jun, 2023. "Stock hyping before auction-style SEOs: Are primary market investors misled?," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 123-140.

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    More about this item

    Keywords

    Securities Offering Reform; Securities regulation; Seasoned equity offerings; Disclosure; Information environment; Shelf registration;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K2 - Law and Economics - - Regulation and Business Law

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