IDEAS home Printed from https://ideas.repec.org/a/bla/finmgt/v39y2010i1p249-272.html
   My bibliography  Save this article

Overinvestment and the Operating Performance of SEO Firms

Author

Listed:
  • Fangjian Fu

Abstract

"Prior studies have documented that firms' operating performance deteriorates following seasoned equity offerings (SEOs). This paper proposes and empirically tests the hypothesis that this poor performance is the result of managers' overinvestment. I find that, subsequent to the offering, SEO firms tend to invest more heavily than nonissuing control firms that are in the same industry and have enough financial slack and similar investment opportunities. More importantly, I find a negative correlation between postissue investment and operating performance, controlling for investment opportunities and preissue performance. Overinvestment results in a reduction in asset productivity and is more severe for firms with relatively fewer investment opportunities." Copyright (c) 2010 Financial Management Association International.

Suggested Citation

  • Fangjian Fu, 2010. "Overinvestment and the Operating Performance of SEO Firms," Financial Management, Financial Management Association International, vol. 39(1), pages 249-272, March.
  • Handle: RePEc:bla:finmgt:v:39:y:2010:i:1:p:249-272
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1755-053X.2010.01072.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:glofin:v:33:y:2017:i:c:p:88-103 is not listed on IDEAS
    2. Fu, Fangjian & Lin, Leming & Officer, Micah S., 2013. "Acquisitions driven by stock overvaluation: Are they good deals?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 24-39.
    3. Dang, Li & Yang, J. Jimmy, 2013. "The choice between rights and underwritten equity offerings: Evidence from Chinese stock markets," Journal of Multinational Financial Management, Elsevier, vol. 23(3), pages 235-253.
    4. repec:eco:journ1:2017-05-26 is not listed on IDEAS
    5. (Grace) Qing Hao, 2014. "Institutional Shareholder Investment Horizons and Seasoned Equity Offerings," Financial Management, Financial Management Association International, vol. 43(1), pages 87-111, March.
    6. Chinmoy Ghosh & Scott Roark & C. Sirmans, 2013. "On The Operating Performance of REITs Following Seasoned Equity Offerings: Anomaly Revisited," The Journal of Real Estate Finance and Economics, Springer, vol. 46(4), pages 633-663, May.
    7. Sinan Gokkaya & Michael J. Highfield, 2014. "Sales of Secondary Shares in SEOs: A Comparison across Top Managers, Other Insiders, and Outsiders," Financial Management, Financial Management Association International, vol. 43(4), pages 757-794, December.
    8. Hong Bo & Zhongnan Huang & Elmer Sterken, 2015. "Bait and Switch: How Do Chinese Firms Use Proceeds from Seasoned Equity Offerings," CESifo Working Paper Series 5198, CESifo Group Munich.
    9. Vithessonthi, Chaiporn, 2017. "Capital investment and internationalization," Journal of Economics and Business, Elsevier, vol. 90(C), pages 31-48.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finmgt:v:39:y:2010:i:1:p:249-272. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/fmaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.