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Are seasoned equity offerings made in response to weak operating performance?

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  • Mark Bayless
  • Nancy Jay

Abstract

This article examines the operating performance of firms surrounding Seasoned Equity Offerings (SEOs) and finds that weak operating performance by issuing firms begins during a 2-year period prior to issue. This is in contrast to the stylized facts that a seasoned equity issue initiates a period of weak performance. Our findings suggest instead that an issue is more likely a reaction to a period of weak performance that is already well under way. Consistent with previous studies, we find that weak performance continues after the issue despite the evidence of favourable macroeconomic conditions.

Suggested Citation

  • Mark Bayless & Nancy Jay, 2011. "Are seasoned equity offerings made in response to weak operating performance?," Applied Financial Economics, Taylor & Francis Journals, vol. 21(12), pages 881-895.
    • Handle: RePEc:taf:apfiec:v:21:y:2011:i:12:p:881-895
    DOI: 10.1080/09603107.2010.539534
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    References listed on IDEAS

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    1. Sapienza, Paola & Polk, Christopher, 2003. "The Real Effects of Investor Sentiment," CEPR Discussion Papers 3826, C.E.P.R. Discussion Papers.
    2. Ritter, Jay R., 2003. "Investment banking and securities issuance," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 5, pages 255-306, Elsevier.
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