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Datastream returns and UK open offers

Author

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  • Susanne Espenlaub
  • Abdullah Iqbal
  • Norman Strong

Abstract

We report a fundamental error in Datastream equity data for share prices and return indices relating to a failure to make any capital adjustments for UK open offers before February 2002. We re-examine the findings of Iqbal, Espenlaub, and Strong (2008), correcting for this error. We find that the short-run market reaction to open offers is now significantly positive. However, we confirm that long-run post-offer returns continue to be significantly negative up to a four-year horizon and, most importantly, that pre-issue discretionary current accruals predict the long-run underperformance, in support of the earnings management hypothesis. We continue to find no support for the timing hypothesis or the managerial response hypothesis.

Suggested Citation

  • Susanne Espenlaub & Abdullah Iqbal & Norman Strong, 2009. "Datastream returns and UK open offers," The European Journal of Finance, Taylor & Francis Journals, vol. 15(1), pages 61-69.
    • Handle: RePEc:taf:eurjfi:v:15:y:2009:i:1:p:61-69
    DOI: 10.1080/13518470802560642
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    Cited by:

    1. Ulrich Erxleben & Dirk Schiereck, 2015. "Wealth creation of mergers in downturn markets," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(4), pages 317-345, October.
    2. Seth Armitage & Dionysia Dionysiou & Angelica Gonzalez, 2014. "Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(5-6), pages 743-772, June.

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