Why Do Investors React Negatively to Seasoned Equity Offerings?

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dc.contributor.author Kim, E. Han
dc.contributor Purnanandam, Amiyatosh K.
dc.date.accessioned 2006-10-12T20:01:53Z
dc.date.available 2006-10-12T20:01:53Z
dc.date.issued 2006-08
dc.identifier 1043 en
dc.identifier.uri http://hdl.handle.net/2027.42/48733
dc.description.abstract The average investor reaction is neutral to primary offerings by firms with managerial incentives closely tied to the shareholder value. Investors react negatively (1) when there are insufficient managerial ownership stakes to deter misuse of SEO proceeds and (2) when there are negative signals transmitted through secondary offerings by insiders and block-holders. Consistent with an agency-based explanation, firms engaging in value-destroying corporate acquisitions suffer large negative returns at the announcement of SEOs. Agency problems seem to be of less concern to investors, however, when firms are subject to intense monitoring by institutional investors and the market for corporate control. Overall, our findings demonstrate that controlling agency problems, an important facet of corporate governance, has a significant effect on firm valuation and the cost of external equity capital. en
dc.format.extent 451136 bytes
dc.format.mimetype application/pdf
dc.language.iso en_US
dc.subject Managerial incentives en
dc.subject Seasoned Equity Offerings en
dc.subject Financing decisions en
dc.subject Pecking order en
dc.subject Asymmetric information en
dc.subject Adverse selection en
dc.subject.classification Finance en
dc.title Why Do Investors React Negatively to Seasoned Equity Offerings? en
dc.type Working Paper en_US
dc.subject.hlbsecondlevel Economics en_US
dc.subject.hlbtoplevel Business en_US
dc.contributor.affiliationum Ross School of Business en
dc.contributor.affiliationother Ross School of Business en
dc.contributor.affiliationumcampus Ann Arbor
dc.description.bitstreamurl http://deepblue.lib.umich.edu/bitstream/2027.42/48733/1/1043-EHanKim.pdf en_US
dc.owningcollname Business, Stephen M. Ross School of - Working Papers Series
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