Seasoned equity offerings,operating performance and overconfidence: Evidence from the UK |
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Authors: | Panagiotis Andrikopoulos |
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Institution: | Department of Accounting and Finance, Faculty of Business and Law, De Montfort University, The Gateway, Leicester LE1 9BH, United Kingdom |
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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. |
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