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Market timing of seasoned equity offerings with long regulative process

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  • Huang, Yong
  • Uchida, Konari
  • Zha, Daolin

Abstract

A long regulative process exists between the initial announcement and execution of seasoned equity offerings (SEOs) in China. Although the initial announcement of an SEO is associated with a significant reduction in the stock price, the regulator (China Securities Regulatory Commission) finally approves it after a significant run up in the price of the stock. Chinese managers execute SEOs after additional stock price increases. As a result, the stock price at issuance is not significantly different from the price on announcement, and is significantly higher than the price three months before the announcement. We also find stock prices decline following the execution. These results suggest that regulative screenings for market stabilization are beneficial for SEO market timing, and that Chinese managers successfully time the market, even with a prolonged regulative process.

Suggested Citation

  • Huang, Yong & Uchida, Konari & Zha, Daolin, 2016. "Market timing of seasoned equity offerings with long regulative process," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 278-294.
    • Handle: RePEc:eee:corfin:v:39:y:2016:i:c:p:278-294
    DOI: 10.1016/j.jcorpfin.2016.05.001
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    Cited by:

    1. Yang, Mingjing & Cheng, Xiaoke & Chan, Kam C. & Gao, Shenghao, 2018. "Information cost or heterogeneous beliefs? An examination of the impact of value uncertainty on auction-style SEO discounts in China," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 206-217.
    2. Saeed Md. Abdullah & Simon Zaby, 2021. "Seasoned Equity Offerings and Differences in Share-Price Impact by Firm Categories," IJFS, MDPI, vol. 9(3), pages 1-10, July.
    3. Sun, Qian & Cheng, Xiaoke & Gao, Shenghao & Yang, Mingjing, 2020. "Are SEO investors misled by analyst optimism bias? Evidence from investor bids in SEO auctions," International Review of Economics & Finance, Elsevier, vol. 68(C), pages 90-104.
    4. Lai, Shaojie & Pu, Xiaoling, 2020. "Mispricing or growth? an empirical analysis of acquisition premium," Finance Research Letters, Elsevier, vol. 37(C).
    5. Huang, Yong & Uchida, Konari & Yu, Xuanying & Zha, Daolin, 2021. "Market timing in private equity placements: Empirical evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    6. Lan, Yueqin & Huang, Yong & Yan, Chao, 2021. "Investor sentiment and stock price: Empirical evidence from Chinese SEOs," Economic Modelling, Elsevier, vol. 94(C), pages 703-714.
    7. Yang, Baochen & Ye, Tao & Ma, Yao, 2022. "Financing anomaly, mispricing and cross-sectional return predictability," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 579-598.
    8. Eden, Lorraine & Indro, Daniel C. & Miller, Stewart R. & Richards, Malika, 2021. "Valuation uncertainty, home and host market uncertainty, and cross-border seasoned equity offerings," International Business Review, Elsevier, vol. 30(3).

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