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Long-Term Performance of Seasoned Equity Offerings: Benchmark Errors and Biases in Expectations

  • Narasimhan Jegadeesh
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    I investigate the long-term performance of firms that issue seasoned equity relative to a variety of benchmarks. I find that these firms significantly underperform all of my benchmarks over the five years following the equity issues. Across SEOs, I find similar levels of underperformance for both small firms and large firms, and both growth firms and value firms. The paper also shows that factor-model benchmarks are misspecified. Hence inferences on SEO underperformance based on such benchmarks are misleading. I also find that SEOs underperform their benchmarks by twice as much within earnings announcement windows as they do outside these windows.

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    Article provided by Financial Management Association in its journal Financial Management.

    Volume (Year): 29 (2000)
    Issue (Month): 3 (Fall)

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    Handle: RePEc:fma:fmanag:jegadeesh00
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