Seasoned equity offerings, operating performance and overconfidence: Evidence from the UK

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

Prior research on seasoned equity offerings in UK shows that equity issuers report a significant long-term underperformance in the period following the event. However, the factors contributing to such underperformance are not yet fully explored. Using a sample of rights issues for the period 1988-1998, this study suggest that the long-term underperformance is significantly related to a deterioration of companies' operating fundamentals in the post-offering period. Further comparison between "Best" and "Worst" post-issue performers reveals that long-term underperformance is predominantly robust in the case of fastgrowing firms with over-optimistic management. This evidence is consistent with the managerial overconfidence and "empire-building" hypotheses.

Original languageEnglish
Pages (from-to)189-215
Number of pages27
JournalJournal of Economics and Business
Volume61
Issue number3
DOIs
Publication statusPublished - May 2009
Externally publishedYes

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Underperformance
Operating performance
Seasoned equity offerings
Overconfidence
Equity
Rights issues
Deterioration
Factors

Keywords

  • Long-term performance
  • Managerial overconfidence
  • Operating performance
  • Rights issues
  • Seasoned equity offerings

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

Cite this

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