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Anchoring on Historical High Prices and Seasoned Equity Offerings

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  • Hovakimian, Armen
  • Hu, Huajing

Abstract

We document that firms’ financing decisions are affected by historical high prices. The ratio of the monthly high price to the 12-month historical high price positively affects the probability of a seasoned equity offering (SEO). Furthermore, the postannouncement market reaction is muted and the offering discount is smaller if the preannouncement stock price is high relative to its historical high price. The results suggest that historical high price reference points may help managers rationally time SEOs to take advantage of market reception and minimize issuance costs.

Suggested Citation

  • Hovakimian, Armen & Hu, Huajing, 2020. "Anchoring on Historical High Prices and Seasoned Equity Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(8), pages 2588-2612, December.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:8:p:2588-2612_6
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