Seasoned Equity Offerings, Valuation and Timing: Evidence from 1980&#39;s and 1990&#39;s

Equity Offerings ◽

Equity Issue ◽

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.

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

BISMA (Bisnis dan Manajemen) ◽

10.26740/bisma.v3n1.p34-48 ◽

2018 ◽

Vol 3 (1) ◽

pp. 34

Author(s):

NANCY IKA ERVINA ◽

MUSDHOLIFAH MUSDHOLIFAH

Keyword(s):

Financial Performance ◽

Equity Offerings ◽

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.

Anchoring on Historical High Prices and Seasoned Equity Offerings

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109019000723 ◽

2019 ◽

Vol 55 (8) ◽

pp. 2588-2612

Author(s):

Armen Hovakimian ◽

Huajing Hu

Keyword(s):

Stock Price ◽

Market Reaction ◽

Reference Points ◽

High Price ◽

Equity Offerings ◽

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.

Operating Performance of the Firms Issuing Equity through Rights Offer

Vikalpa The Journal for Decision Makers ◽

10.1177/0256090920030403 ◽

2003 ◽

Vol 28 (4) ◽

pp. 25-40 ◽

Cited By ~ 5

Author(s):

P J Jijo Lukose ◽

S Narayan Rao

Keyword(s):

Operating Performance ◽

Equity Offerings ◽

Equity Issue ◽

Equity Issues ◽

Foreign Companies ◽

Market Participants ◽

Information Hypothesis ◽

Run Up ◽

Finance Theory

Rights equity issue is one of the most common methods for subsequent equity issue in the Indian market. In rights offer, current shareholders are given short-term warrants on a pro-rata basis with the option to either purchase the new shares or sell the warrants in the market before expiration. Rights equity issue can be a potential solution to the adverse selection problem associated with capital issue and has comparatively low direct costs. In this paper, the authors analyse the operating performance of the BSE- listed manufacturing firms following rights equity issue and their linkages with firm-specific characteristics as hypothesized in the finance theory. They have selected 392 rights equity issues during the period 1991-2000 and used a methodology robust to the mean-reverting nature of accounting income. Consistent with empirical results for seasoned equity offerings in the US market, there is a statistically significant decline in the operating performance after the rights equity issue. This decline in performance is more severe for big firms, low market-to-book value firms, and firms with lower directors' holdings. Interestingly, foreign companies and companies belonging to small business groups do not show any declining trend. The authors find that the decline in perform- ance is due to the inefficiency in utilization of assets and not due to decrease in profit margins. Further, various proxies measuring market valuation also decline during the post-issue period after a run up in the pre-issue period. The results of the study suggest that over-investment hypothesis and agency models can better explain the decline in performance compared to asymmetric information hypothesis. The results also indicate that rights equity issues are not simple de-leveraging decisions. These findings have implications for several groups of capital market participants and the authors conclude with specific guidelines for them which are as follows: The investing public and analyst who are too optimistic about the issuers should consider deteriorating performance while arriving at the valuations. Investors should be vigilant about the ‘empire building’ implications of increased investments through rights issue. Optimistic managers should reassess the investment opportunities and have con-servative plans before approaching the market. The policy makers and regulators should come out with better regulatory framework to control and penalize the opportunistic managers.

The Role of Internal Control in the Equity Issue Market: Evidence From Seasoned Equity Offerings

Journal of Accounting Auditing & Finance ◽

10.1177/0148558x15602821 ◽

2015 ◽

Vol 32 (3) ◽

pp. 303-328 ◽

Cited By ~ 5

Author(s):

Xinghua Gao ◽

Yonghong Jia

Keyword(s):

Internal Control ◽

Risk Premium ◽

Dominant Role ◽

Equity Capital ◽

Equity Offerings ◽

Equity Issue ◽

Sarbanes Oxley ◽

The Cost

This article examines the role of internal control requirements under the Sarbanes–Oxley (SOX) Act of 2002 in firms’ cost of raising equity capital. We find that, prior to the disclosure of internal control weaknesses (ICWs), ICWs are not directly associated with underwriters’ gross spread and seasoned equity offering (SEO) underpricing. After the disclosure, however, underwriters charge a risk premium on ICW issuers, especially on those disclosing ICWs in multiple consecutive years. We also find that SEO underpricing is exacerbated by multiple-year-disclosed ICWs but not by first-timers. More notably, we find that managers play a dominant role in deciding issue size pre-disclosure, but this dominance weakens post-disclosure. Taken together, our evidence suggests that internal controls help moderate the cost of raising equity capital and that ICW disclosures have significant implications for underwriters in the equity issue market.

On the Conditioning of the Financial Market’s Reaction to Seasoned Equity Offerings

THE LAHORE JOURNAL OF ECONOMICS ◽

10.35536/lje.2006.v11.i2.a8 ◽

2006 ◽

Vol 11 (2) ◽

pp. 141-154 ◽

Cited By ~ 1

Author(s):

Onur Arugaslan ◽

Louise Miller

Keyword(s):

Asymmetric Information ◽

Emerging Markets ◽

Financial Market ◽

Prior Information ◽

Common Stock ◽

Equity Offerings ◽

Growth Prospects ◽

The U.S

Consistent with asymmetric information arguments, prior research has shown that the financial market typically responds negatively to the announcement of a seasoned equity offering (SEO). Korajczyk and Levy (2003), however, suggest that while some firms time the issuance of their common stock to take advantage of outside investor overvaluations, financially constrained firms do not. We examine whether prior information on how financially constrained a firm is along with its growth prospects influences the financial market’s response to the firm’s announcement to sell common stock. We find evidence that the financial market does condition its response upon such information using a sample of SEOs from the U.S. Our results also have implications for the financial market’s reaction to SEOs/rights offerings in emerging markets.