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Does Rule 10b-21 increase SEO discounting?

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  • Autore, Don M.
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    Abstract

    Short sale constraints prior to seasoned equity offers, imposed by Rule 10b-21 in 1988, are believed to compromise pricing efficiency and contribute to the large temporal increase in offer price discounting. This study provides additional insights by examining shelf-registered offers, which were exempt from pre-issue short sale constraints until 2004. The results suggest that pre-issue short sale constraints do not influence the level of discounting in seasoned equity offers. Moreover, this study reports that the recent temporal increase in discounting is due to a greater prevalence of overnight shelf offers, which are associated with relatively large offer price discounts.

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    File URL: http://www.sciencedirect.com/science/article/B6WJD-50X3N25-1/2/4ac51a723d10e564f51f43c56583b623
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Intermediation.

    Volume (Year): 20 (2011)
    Issue (Month): 2 (April)
    Pages: 231-247

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    Handle: RePEc:eee:jfinin:v:20:y:2011:i:2:p:231-247

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    Web page: http://www.elsevier.com/locate/inca/622875

    Related research

    Keywords: Seasoned equity offer Discounting Short sale constraints Shelf registration;

    References

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    1. Bertrand, Marianne & Mullainathan, Sendhil, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Scholarly Articles 3429713, Harvard University Department of Economics.
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    8. Gerard, Bruno & Nanda, Vikram, 1993. " Trading and Manipulation around Seasoned Equity Offerings," Journal of Finance, American Finance Association, vol. 48(1), pages 213-45, March.
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    11. Denis, David J, 1993. "The Costs of Equity Issues since Rule 415: A Closer Look," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 16(1), pages 77-88, Spring.
    12. Autore, Don M. & Kumar, Raman & Shome, Dilip K., 2008. "The revival of shelf-registered corporate equity offerings," Journal of Corporate Finance, Elsevier, vol. 14(1), pages 32-50, February.
    13. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    14. Shane A. Corwin, 2003. "The Determinants of Underpricing for Seasoned Equity Offers," Journal of Finance, American Finance Association, vol. 58(5), pages 2249-2279, October.
    15. Mola, Simona & Loughran, Tim, 2004. "Discounting and Clustering in Seasoned Equity Offering Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(01), pages 1-23, March.
    16. Loderer, Claudio F. & Sheehan, Dennis P. & Kadlec, Gregory B., 1991. "The pricing of equity offerings," Journal of Financial Economics, Elsevier, vol. 29(1), pages 35-57, March.
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    Cited by:
    1. Autore, Don M. & Gehy, Dominique, 2013. "Changing the rules again: Short selling in connection with public equity offers," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1974-1985.

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