Jonathan Clarke (Georgia Institute of Technology) Craig Dunbar (University of Western Ontario) Kathleen Kahle (University of Arizona)
Abstract
We examine long-run stock and operating performance following secondary equity offerings. For a subsample of issuers in which the seller is an insider, both 3- and 5-year post-issue abnormal stock returns are significantly negative. The findings are robust to alternative long-run abnormal return measurement methodologies. The abnormal returns are large relative to the initial market reaction (the mean 5-year abnormal returns is -33.33%). The operating performance of these firms also declines subsequent to the issue. This supports the hypothesis that the negative performance of secondary equity offerings can be attributed to managers exploiting "windows of opportunity" by issuing overvalued shares.
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Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 77 (2004) Issue (Month): 3 (July) Pages: 575-604 Download reference. The following formats are available: HTML
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