Analyst Following and Equity Offerings Subsequent to Initial Public Offerings |
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Authors: | Best Ronald W. Payne Janet D. Howell Jann C. |
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Affiliation: | (1) Department of Accounting and Finance, Richards College of Business, State University of West Georgia, Carrollton, Georgia, 30118. Tel.;(2) Southwest Texas State University, USA;(3) Iowa State University, USA |
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Abstract: | Analyst forecast information is collected for firms following their IPOs and is used in an examination of subsequent seasoned equity offerings (SEOs). Consistent with information asymmetry arguments, the analysis indicates that a larger percentage of firms conducting SEOs within three years of the IPO are covered by financial analysts than those without SEOs, and that analyst coverage is a significant predictor of subsequent SEOs. In addition, the results indicate that long-term earnings growth forecasts are larger for firms with subsequent SEOs, but growth forecasts decline significantly following the SEOs. Further, SEO abnormal returns exhibit a significant negative relationship with earnings growth forecasts. These results are consistent with windows of opportunity arguments since they suggest that SEOs are timed to coincide with the peak of earnings growth expectations, but that market participants compensate by reacting more negatively to offerings by firms with high growth forecasts. |
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Keywords: | analyst forecasts seasoned equity offerings windows of opportunity |
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