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An Empirical Investigation of Short-Selling Activity Prior to Seasoned Equity Offerings

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  • Safieddine, Assem
  • Wilhelm, William J, Jr

Abstract

The authors investigate the nature and magnitude of short-selling activity around seasoned equity offerings, the relation between short-selling activity and issue discounts, and the consequences of the Securities and Exchange Commission adoption of Rule 10b-21 in response to concerns about manipulative short-selling practices. Seasoned offerings are characterized by abnormally high levels of short selling and option open interest. Higher levels of such activity are related to lower expected proceeds from the issuance of new shares. Where it could not be circumvented, Rule 10b-21 appears to have curbed short-selling activity and reduced issue discounts. Copyright 1996 by American Finance Association.

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  • Safieddine, Assem & Wilhelm, William J, Jr, 1996. " An Empirical Investigation of Short-Selling Activity Prior to Seasoned Equity Offerings," Journal of Finance, American Finance Association, vol. 51(2), pages 729-749, June.
  • Handle: RePEc:bla:jfinan:v:51:y:1996:i:2:p:729-49
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    3. repec:oup:rcorpf:v:5:y:2016:i:2:p:200-238. is not listed on IDEAS
    4. Cinquegrana, Piero, 2009. "Short Selling: A known unknown," ECMI Papers 1671, Centre for European Policy Studies.
    5. Autore, Don M. & Kovacs, Tunde, 2014. "Investor recognition and seasoned equity offers," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 216-233.
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    10. O. Emre Ergungor & C. N. V. Krishnan & Ajai K. Singh & Allan A. Zebedee, 2004. "Bank seasoned equity offers: do voluntary and involuntary offers differ?," Working Paper 0414, Federal Reserve Bank of Cleveland.
    11. repec:oup:rfinst:v:29:y:2016:i:12:p:3278-3320. is not listed on IDEAS
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    16. 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.
    17. R. Jared DeLisle & Bong Soo Lee & Nathan Mauck, 2016. "The dynamic relation between options trading, short selling, and aggregate stock returns," Review of Quantitative Finance and Accounting, Springer, vol. 47(3), pages 645-671, October.
    18. Geczy, Christopher C. & Musto, David K. & Reed, Adam V., 2002. "Stocks are special too: an analysis of the equity lending market," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 241-269.
    19. Akhigbe, Aigbe & Whyte, Ann Marie, 2015. "SEO announcement returns and internal capital market efficiency," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 271-283.
    20. Delisle, R. Jared & Lee, Bong Soo & Mauck, Nathan, 2012. "The dynamic relation between short sellers, option traders, and aggregate returns," MPRA Paper 42566, University Library of Munich, Germany.
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    23. Chen, Hsuan-Chi & Chou, De-Wai & Lai, Christine W. & Yeh, Yi-Ting, 2014. "The role of lending-relationship banks in the underwriting of seasoned equity offerings: Conflict of interest or certification?," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 327-346.

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