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Windows of opportunity and seasoned equity offerings: An empirical study

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  • K.R. Naveen Kumar
  • Iqbal Thonse Hawaldar
  • T. Mallikarjunappa

Abstract

Taking a sample of seasoned equity offerings (SEOs) by firms listed on Bombay Stock Exchange (BSE) from the year 1992 to 2012, we examine two of the key issues concerning SEOs. First, whether SEOs are underpriced, issued at a price lower than the prevailing market price; and second, whether companies time their issues. Study of 162 SEOs exhibits significant underpricing at 1% significance level leading us to conclude that SEOs in India are significantly underpriced. Analysis of abnormal returns for 114 SEOs taking different event windows surrounding issue opening dates reveals that, except for the −1 to + 1 event window, CAAR for all other event windows are significantly negative. This leads us to conclude that investors in India experience significantly negative abnormal returns surrounding SEO issue opening. Overall, findings of the study reveal that SEOs in India are underpriced and that there exist windows of opportunity for SEOs in India.

Suggested Citation

  • K.R. Naveen Kumar & Iqbal Thonse Hawaldar & T. Mallikarjunappa, 2018. "Windows of opportunity and seasoned equity offerings: An empirical study," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1528688-152, January.
    • Handle: RePEc:taf:oaefxx:v:6:y:2018:i:1:p:1528688
    DOI: 10.1080/23322039.2018.1528688
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    Citations

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    Cited by:

    1. Saeed Md. Abdullah & Simon Zaby, 2021. "Seasoned Equity Offerings and Differences in Share-Price Impact by Firm Categories," IJFS, MDPI, vol. 9(3), pages 1-10, July.
    2. K. Abhaya Kumar & Prakash Pinto & Iqbal Thonse Hawaldar & K. G. Ramesh, 2021. "Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 523-537.
    3. Dewi Ratih S.E. & M.S.M., 2023. "What Information Implied in the Equity Offering Mechanism with Market Timing Considerations?," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 17-32.
    4. Bharat Kumar Meher & Iqbal Thonse Hawaldar & Mathew Thomas Gil & Deebom Zorle Dum, 2021. "Measuring Leverage Effect of Covid 19 on Stock Price Volatility of Energy Companies Using High Frequency Data," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 489-502.

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