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Cash shortfall, SEO offer size, and SEO announcement returns

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  • Ebrahim Bazrafshana

    (PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

We examine the announcement returns of 3483 seasoned equity offerings (SEOs) during the 1996–2018 period. Although there is a significant decline in SEO announcement returns, we show that cash shortfall in the year before SEO has a positive impact on SEO announcement returns. By matching SEO offers sizes and cash shortfalls, we also find that negative announcement-period returns become positive when SEO offer size is determined in concert with cash shortfall. Patterns of long-run abnormal firm performance after SEO announcements are consistent with those we document for the announcement-period returns. Our results suggest that cash shortfall in the year before SEO as indication of funds needs mitigates agency spending of SEO proceeds, and thus, the market welcomes the SEO announcement with positive stock price reactions.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Ebrahim Bazrafshana & Amine Tarazi, 2022. "Cash shortfall, SEO offer size, and SEO announcement returns," Post-Print hal-03684330, HAL.
    • Handle: RePEc:hal:journl:hal-03684330
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