Does liquidity risk explain low firm performance following seasoned equity offerings?

Pawel Bilinski, Weimin Liu, Norman Strong

Research output: Journal PublicationArticlepeer-review

13 Citations (Scopus)


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 languageEnglish
Pages (from-to)2770-2785
Number of pages16
JournalJournal of Banking and Finance
Issue number10
Publication statusPublished - Oct 2012


  • Event studies
  • Liquidity risk
  • Seasoned equity offerings

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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