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Seasoned Equity Offerings, Valuation and Timing: Evidence from 1980's and 1990's

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  • Jan Jindra

    (Menlo College, 1000 El Camino Real, Atherton, CA 94026, USA)

Abstract

While the existing literature has focused on whether firms issue equity when they are overvalued, this paper examines whether there was a better time to issue seasoned equity when the valuation of a firm's shares might have been even more favorable. Using three valuation approaches, the findings suggest that: (1) the valuation of firms issuing seasoned equity is the most favorable at the time of the offering and (2) the estimated valuation errors are significantly related to the probability that firms will undertake a seasoned equity issue. These results are consistent with firms optimizing the timing of the seasoned equity offering so as to take maximum possible advantage of misvaluation of their shares.

Suggested Citation

  • Jan Jindra, 2013. "Seasoned Equity Offerings, Valuation and Timing: Evidence from 1980's and 1990's," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 3(03n04), pages 1-32.
    • Handle: RePEc:wsi:qjfxxx:v:03:y:2013:i:03n04:n:s2010139213500134
    DOI: 10.1142/S2010139213500134
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    References listed on IDEAS

    as
    1. Beaver, William H. & McNichols, Maureen F. & Nelson, Karen K., 2000. "Do Firms Issuing Equity Manage their Earnings? Evidence from the Property-Casualty Insurance Industry," Research Papers 1605, Stanford University, Graduate School of Business.
    2. Ming Dong & David Hirshleifer & Siew Hong Teoh, 2012. "Overvalued Equity and Financing Decisions," The Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3645-3683.
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