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Seasoned equity offerings, operating performance and overconfidence: Evidence from the UK

  • Andrikopoulos, Panagiotis

Prior research on seasoned equity offerings in UK shows that equity issuers report a significant long-term underperformance in the period following the event. However, the factors contributing to such underperformance are not yet fully explored. Using a sample of rights issues for the period 1988-1998, this study suggest that the long-term underperformance is significantly related to a deterioration of companies' operating fundamentals in the post-offering period. Further comparison between "Best" and "Worst" post-issue performers reveals that long-term underperformance is predominantly robust in the case of fastgrowing firms with over-optimistic management. This evidence is consistent with the managerial overconfidence and "empire-building" hypotheses.

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Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 61 (2009)
Issue (Month): 3 ()
Pages: 189-215

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Handle: RePEc:eee:jebusi:v:61:y:2009:i:3:p:189-215
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconbus

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