Abstract
A seasoned equity offering (SEO) can improve a firm's stock liquidity and lower its cost of capital. This paper examines whether SEO firms achieve a liquidity gain and the sources of this gain. It explores the role of liquidity risk in explaining SEO long-run performance. The evidence shows that SEO firms experience significant post-issue improvements in liquidity and reductions in liquidity risk. Size and book-to-market matching fails to control for these liquidity effects, generating the low long-term post-SEO performance documented in the literature. After adjusting for liquidity risk, SEO firms show normal long-term performance.
| Original language | English |
|---|---|
| Pages (from-to) | 2770-2785 |
| Number of pages | 16 |
| Journal | Journal of Banking and Finance |
| Volume | 36 |
| Issue number | 10 |
| DOIs | |
| Publication status | Published - Oct 2012 |
Keywords
- Event studies
- Liquidity risk
- Seasoned equity offerings
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
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Bilinski, P., Liu, W., & Strong, N. (2012). Does liquidity risk explain low firm performance following seasoned equity offerings? Journal of Banking and Finance, 36(10), 2770-2785. https://doi.org/10.1016/j.jbankfin.2012.07.009