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THE LONG‐RUN PERFORMANCE OF COMPANIES THAT WITHDRAW SEASONED EQUITY OFFERINGS
Author(s) -
Alderson Michael J.,
Betker Brian L.
Publication year - 2000
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2000.tb00737.x
Subject(s) - equity (law) , business , stock price , stock (firearms) , agency cost , monetary economics , finance , accounting , economics , shareholder , corporate governance , mechanical engineering , paleontology , series (stratigraphy) , political science , law , biology , engineering
We examine the long‐run stock price and operating performance of companies that withdraw seasoned equity offerings (SEOs). Firms that withdraw an offering provide an opportunity to examine whether markets fully adjust to the information conveyed when managers announce the intent to issue shares, independent of any agency problems that might be intensified by the completion of the offering. As in completed seasoned equity offerings, long‐horizon event‐time operating and stock price performance in sample firms is substantially lower than what is observed among control firms. Underperformance is also observed in an equally weighted calendar‐time analysis. Results are consistent with overpricing among small firms that attempt, but then withdraw, SEOs.