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Managerial Financial Education and the Valuation Effects of Seasoned Equity Offerings: Evidence from Taiwan
Author(s) -
Chen ChingYen,
Su XuanQi,
Chen ChinMing,
Chen MeiShih
Publication year - 2019
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12281
Subject(s) - opportunism , valuation effects , information asymmetry , business , equity (law) , valuation (finance) , earnings management , earnings , accounting , monetary economics , finance , economics , political science , law , market economy
This paper tests how managerial financial education explains the valuation effects of seasoned equity offerings (SEOs). Using a sample of Taiwanese listed firms during 2007–2018, our results show that investors react more negatively to SEO announcements by firms with more financially educated managers (MFEMs). Such a negative effect is more pronounced for firms with a higher information asymmetry and more earnings management. Further evidence indicates that SEO firms with MFEMs are substantially overvalued and thus experience a significantly long‐run post‐SEO underperformance. MFEMs are also found to reduce their ownership prior to SEOs. Our overall results support the opportunism‐based information advantage hypothesis.