Anchoring on Historical High Prices and Seasoned Equity Offerings

2019 ◽  
Vol 55 (8) ◽  
pp. 2588-2612
Author(s):  
Armen Hovakimian ◽  
Huajing Hu
Keyword(s):  
Stock Price ◽  
Market Reaction ◽  
Seasoned Equity Offerings ◽  
Reference Points ◽  
High Price ◽  
Equity Offerings ◽  
Seasoned Equity Offering ◽  
Financing Decisions ◽  
Price Reference ◽  
Equity Offering

We document that firms’ financing decisions are affected by historical high prices. The ratio of the monthly high price to the 12-month historical high price positively affects the probability of a seasoned equity offering (SEO). Furthermore, the postannouncement market reaction is muted and the offering discount is smaller if the preannouncement stock price is high relative to its historical high price. The results suggest that historical high price reference points may help managers rationally time SEOs to take advantage of market reception and minimize issuance costs.

scholarly journals CEO-shareholder incentive alignment around SEOs

2015 ◽  
Vol 41 (1) ◽  
pp. 45-66
Author(s):  
Yilei Zhang ◽  
Yi Jiang
Keyword(s):  
Stock Price ◽  
Wealth Effect ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Equity Financing ◽  
Compensation Policy ◽  
Incentive Alignment ◽  
Content Type ◽  
Financing Decisions ◽  
Long Run

Purpose – The purpose of this paper is to examine CEO wealth changes around seasoned equity offerings (SEOs) to explore the shareholder-manager incentive alignment in major corporate equity financing decisions. Design/methodology/approach – The authors decompose CEO wealth into three major components: price effect, board compensation grant, and CEO’s own portfolio adjustment. The authors then compare SEO-event sample vs non-event samples; and evaluate the dynamic and long-run CEO wealth effect. Findings – The authors find when market reacts negatively to SEO announcement leading to losses in CEO’s existing firm-related wealth, CEO gets additional grants to offset the losses. Although this appears to be a rent-seeking activity, the authors find that the additional grants are mainly in the form of stock options which would have no value if stock price failed to pick up in the future. In this sense, the additional grants align the interests between shareholders and managers. Consistent with this argument, the authors show that the additional grants motivate CEOs to promote the stock performance, benefiting themselves as well as shareholders in the long-run. Originality/value – The study explicitly calculates the contribution of each wealth component to CEO total wealth effect. The results improve the understanding of CEO compensation policy change after major corporate event and contribute to the literature of the optimality explanation of prevailing compensation policy.

scholarly journals Analisis Kinerja Keuangan PT. BNI (Persero) Tbk Sebelum dan Sesudah Melakukan Seasoned Equity Offerings

2018 ◽  
Vol 3 (1) ◽  
pp. 34
Author(s):  
NANCY IKA ERVINA ◽  
MUSDHOLIFAH MUSDHOLIFAH
Keyword(s):  
Financial Performance ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Seasoned Equity Offering ◽  
Public Company ◽  
Before And After ◽  
Operational Activities ◽  
A Company ◽  
Better Than ◽  
Equity Offering

Seasoned equity offering (SEO) is done by public company which need seasoned loan to costing operational activities and invest.  Except to costing operational activities and invest a company, this offering can used to looking for seasoned loan to pay company loan. The aim of this study is to analyze financial performance of PT. BNI (Persero) Tbk before and after seasoned equity offering (SEO) with CAMELS (Capital, Assets Quality, Management, Equity, Liquidity, dan Sensitivity) measurement. This research represent descriptive which purposed to collect information about exist symptom.  This research is done in PT. BNI (Persero) Tbk. Ratio analysis are using Capital : CAR, Assets Quality : KAP1 dan KAP2, Earning : ROA dan BOPO, Liquidity : NCM to CA dan LDR, which later from the ratio can be explained its meaning. The conclusion of this research that financial performance PT. BNI (Persero) Tbk generally before seasoned equity offering (2006) is better than after seasoned equity offering (2008) which is in first period (January – March), second period (April – June), and third period (July – September). Therefore in fourth period (October  - December) 2008, financial performance PT. BNI (Persero) Tbk is better than 2006.

Seasoned Equity Offerings, Valuation and Timing: Evidence from 1980's and 1990's

2013 ◽  
Vol 03 (03n04) ◽  
pp. 1350013
Author(s):  
Jan Jindra
Keyword(s):  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Equity Issue ◽  
Seasoned Equity Offering ◽  
Equity Offering

While the existing literature has focused on whether firms issue equity when they are overvalued, this paper examines whether there was a better time to issue seasoned equity when the valuation of a firm's shares might have been even more favorable. Using three valuation approaches, the findings suggest that: (1) the valuation of firms issuing seasoned equity is the most favorable at the time of the offering and (2) the estimated valuation errors are significantly related to the probability that firms will undertake a seasoned equity issue. These results are consistent with firms optimizing the timing of the seasoned equity offering so as to take maximum possible advantage of misvaluation of their shares.

Seasoned Equity Offerings and Stock Price Crashes

2015 ◽  
Author(s):  
Rodney D Boehme ◽  
Veljko Fotak ◽  
Anthony D. May
Keyword(s):  
Stock Price ◽  
Seasoned Equity Offerings ◽  
Equity Offerings

scholarly journals The Effects of Operational Structure Change on Performance after Seasoned Equity Offerings

2017 ◽  
Author(s):  
Chihyoun Ahn ◽  
Mi-Ok Kim ◽  
Hyung-Rok Jung
Keyword(s):  
Sustainable Development ◽  
Stock Price ◽  
Operating Performance ◽  
Seasoned Equity Offerings ◽  
Structure Change ◽  
Equity Offerings ◽  
Price Response ◽  
Sustainability Strategy ◽  
Rate Of Increase ◽  
Operational Structure

Sustainability is directly linked to firms’ survival in competitive markets. To survive, firms need extra capital, and seasoned equity offerings (SEOs) are one sustainability strategy. Additional resources from SEOs leads to changes in firms’ operational structure, which brings future sustainability. This study investigates whether there is sustainability in firms’ operational structure and the effects of sustainable development on operational performance and market reaction. We measure the operational structure change of firms as three proxies: 1) the rate of increase in the number of operating segments, 2) the Berry–Herfindahl index using the ratio of sales of each operating segment out of total sales, and 3) the size of net investment in plant and equipment. Our results show that operational structure change has a statistically significant and positive correlation with long-term operating performance. In addition, there is no significant stock price response at first, but the operating performance in the next term is perceived as a favorable factor after 3 years. The results show that there are different responses in the stock market toward operational structure change. The empirical results confirm that firms with SEO have sustainable development in operational structure and that markets recognize firms’ sustainability strategy arising from SEOs.

Liquidity, Volatility and Stock Price Adjustment: Evidence from Seasoned Equity Offerings in an Emerging Market

2005 ◽  
Vol 08 (01) ◽  
pp. 31-51 ◽  
Author(s):  
Chia-Cheng Ho ◽  
Chin-Chuan Lee ◽  
Chien-Ting Lin ◽  
C. Edward Wang
Keyword(s):  
Stock Price ◽  
Direct Evidence ◽  
Practical Implication ◽  
Emerging Market ◽  
Seasoned Equity Offerings ◽  
Price Adjustment ◽  
Equity Offerings ◽  
Stock Return Volatility ◽  
Using Data ◽  
Stock Price Adjustment

Using data from the Taiwanese stock market, an emerging market, this paper documents positive changes in liquidity and volatility around seasoned equity offerings (SEOs). These findings are consistent with the uncertain signal hypothesis that investors with diverse views on the information content of SEOs are likely to induce larger trading activity and subsequent higher stock return volatility. We also provide direct evidence that changes in liquidity is positively associated with stock price adjustment. However, the relations among liquidity, volatility and price movements appear to rely on how SEOs are conducted. A practical implication is that managers may influence liquidity and stock price movement through their choice of SEOs issuing methods.

scholarly journals How international competitiveness moderates the relationship between corporate governance and seasoned equity offering underpricing

2017 ◽  
Vol 14 (4) ◽  
pp. 314-327
Author(s):  
Fu-Jiing Shiue ◽  
Yi-Yin Yen
Keyword(s):  
Corporate Governance ◽  
Stock Price ◽  
International Competitiveness ◽  
Corporate Management ◽  
International Expansion ◽  
Seasoned Equity Offering ◽  
Market Participants ◽  
Premium Price ◽  
The Relationship ◽  
Equity Offering

When a company exhibits favorable management performance, investors may have higher intention to purchase its stock at a premium price; the company may also make more desirable decisions in international expansion, attain higher international competitiveness, win the preference of investors, and thus exhibit a higher stock price, which results in higher seasoned equity offering (SEO) underpricing. Therefore, international competitiveness possibly plays a crucial moderating role between corporate governance and SEO underpricing. The empirical results of this study show that compared with government-controlled companies, international competitiveness strengthens the relationship of SEO underpricing with one-family-controlled companies, two-or-more family-controlled companies, and manager-controlled companies. Accordingly, companies should improve their international competitiveness and conduct favorable corporate management to elicit the investment intention of market participants worldwide.

scholarly journals The Effects of Operational Structure Change on Performance after Seasoned Equity Offerings

2017 ◽  
Author(s):  
Chihyoun Ahn ◽  
Mi-Ok Kim ◽  
Hyung-Rok Jung
Keyword(s):  
Sustainable Development ◽  
Stock Price ◽  
Operating Performance ◽  
Seasoned Equity Offerings ◽  
Structure Change ◽  
Equity Offerings ◽  
Price Response ◽  
Sustainability Strategy ◽  
Rate Of Increase ◽  
Operational Structure

Sustainability is directly linked to firms’ survival in competitive markets. To survive, firms need extra capital, and seasoned equity offerings (SEOs) are one sustainability strategy. Additional resources from SEOs leads to changes in firms’ operational structure, which brings future sustainability. This study investigates whether there is sustainability in firms’ operational structure and the effects of sustainable development on operational performance and market reaction. We measure the operational structure change of firms as three proxies: 1) the rate of increase in the number of operating segments, 2) the Berry–Herfindahl index using the ratio of sales of each operating segment out of total sales, and 3) the size of net investment in plant and equipment. Our results show that operational structure change has a statistically significant and positive correlation with long-term operating performance. In addition, there is no significant stock price response at first, but the operating performance in the next term is perceived as a favorable factor after 3 years. The results show that there are different responses in the stock market toward operational structure change. The empirical results confirm that firms with SEO have sustainable development in operational structure and that markets recognize firms’ sustainability strategy arising from SEOs.

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