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Stock Returns and Operating Performance of Securities Issuers

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  • Gil S. Bae
  • Jinho Jeong
  • Huey‐Lian Sun
  • Alex P. Tang

Abstract

We examine long‐run stock returns and operating performance around firms’ offerings of common stock, convertible debt, and straight debt from 1985 to 1990. We find that pre‐issue abnormal returns are positive and significant for stock issuers, but not for convertible and straight debt issuers. The post‐issue mean returns show that common stock and convertible debt issuers experience underperformance during the post‐issue periods, but straight debt issuers do not. Consistent with these results, common stock issuers experience the best pre‐issue operating performance among all three types of issuers, and operating performance declines during the post‐issue periods for common stock and convertible debt issuers. Using a new approach in linear model estimations to correct heteroskedasticity and to adjust for finite sample, we find a positive relation between post‐issue operating performance and issue‐period stock price reactions. The results suggest that future operating performance is anticipated at the issue and that securities issues provide information on issuers’ future performance.

Suggested Citation

  • Gil S. Bae & Jinho Jeong & Huey‐Lian Sun & Alex P. Tang, 2002. "Stock Returns and Operating Performance of Securities Issuers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(3), pages 337-352, September.
    • Handle: RePEc:bla:jfnres:v:25:y:2002:i:3:p:337-352
    DOI: 10.1111/1475-6803.00022
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    Cited by:

    1. Jyh-Dean Hwang, 2013. "Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 137-163, December.
    2. Jan L. Williams & Alex P. Tang, 2009. "Private placements of convertible securities: stock returns, operating performance and abnormal accruals," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 873-899, December.
    3. Lo, Huai-Chun & Koedijk, Kees G. & Gao, Xiang & Hsu, Yuan-Teng, 2020. "How do job vacancy rates predict firm performance? A web crawling massive data perspective," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    4. Marciukaityte, Dalia & Varma, Raj, 2007. "Institutional investors as suppliers of equity-linked capital: Evidence from privately placed convertible debt," Journal of Business Research, Elsevier, vol. 60(4), pages 357-364, April.
    5. Patrick Christian Feihle & Jochen Lawrenz, 2017. "The Issuance of German SME Bonds and its Impact on Operating Performance," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(3), pages 227-259, August.
    6. Jyh-Dean Hwang, 2013. "Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 137-163, December.
    7. Jun Woo Park & Seyoung Guahk, 2017. "Financial Performance of Healthcare Firms: The Case of Korea," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 721-728.
    8. Khalid Elbadraoui & Jean-Jacques Lilti & Bouchra M'Zali, 2008. "La performance opérationnelle à long terme des entreprises françaises émettrices d’obligations convertibles," Revue Finance Contrôle Stratégie, revues.org, vol. 11(3), pages 125-154, September.
    9. Devrim Yaman, 2010. "Convertible Bond Design And Long-Run Operating Performance," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(3), pages 17-30.
    10. Siougle, Georgia, 2007. "Accounting information and the valuation of Seasoned Equity Offerings (SEOs)," The International Journal of Accounting, Elsevier, vol. 42(4), pages 380-395, December.
    11. Devrim Yaman, 2011. "Long-Run Operating Performance Of Preferred Stock Issuers," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 5(2), pages 61-73.

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