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Industry Competition, Market Shares, and the Long-Run Performance of SEO Firms

Author

Listed:
  • Weiju Young

    (Chaoyang University of Technology)

  • Junming Hsu

    (National Chung-Hsing University)

  • Peng-Yu Gao

    (National Chung-Hsing University)

  • Tzu-Ju Yang

    (National Chung-Hsing University)

Abstract

This study investigates the impacts of industry competition and market share on the long-run performance of firms conducting seasoned equity offerings (SEOs). These two factors are related to the “market dominance” and “expense preference” hypotheses, which suggest that dominant (low-competitive and high-market-share) firms would perform well after SEOs if they can bring their market advantages into full play and poorly if managers intend to hold more funds to expend, respectively. The results show that dominant SEO firms tend to outperform their matching firms and challenging (high-competitive and low-market-share) firms, supporting the market dominance hypothesis. This finding implies that firms with advantages in the product market can increase their competence via SEOs due to their ample resources. We contribute to the literature by showing that business risk can affect the performance following financing activities, a result that can help long-run investors select more promising SEO stocks.

Suggested Citation

  • Weiju Young & Junming Hsu & Peng-Yu Gao & Tzu-Ju Yang, 2023. "Industry Competition, Market Shares, and the Long-Run Performance of SEO Firms," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(4), pages 845-867, December.
    • Handle: RePEc:kap:apfinm:v:30:y:2023:i:4:d:10.1007_s10690-023-09402-1
    DOI: 10.1007/s10690-023-09402-1
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    More about this item

    Keywords

    Seasoned equity offerings (SEOs); Long-run performance; Industry competition; Market share;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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