| A seasoned equity offering (SEO) is a new equity issue by a public firm. SEOs are very important activities during the life of firms. A significant body of empirical work finds stylized facts concerning the stock price dynamics around seasoned equity offerings, which are the stock price run-up prior to the issue and the low long-run post-issue return. Chapter 1 reviews the empirical evidence and different explanations of the return patterns around SEOs.;Chapter 2 examines the trading patterns of institutional investors around SEOs and relates to the SEO market timing. Institution investors, on average, significantly increase their share ownership at the time of the SEOs. There is no evidence that these increases take into account the timing patterns of SEOs. These patterns hold for both institutional shareholders with long- and short- investment horizons. Finally, results show that firms with higher institutional shareholdings are somewhat less likely to engage in the timing of their SEOs. Overall, these results imply that the SEO market timing does not benefit institutional shareholders that maintain stakes in the issuing firms.;Chapter 3 examines the impact of reference point prices on seasoned equity offerings. It documents that a firm's financing decision is affected by the past peak price, after controlling for the firm's characteristics. The ratio of the offering price to the past peak price clusters around one with the probability of issuing exactly at the past peak price much higher than that at prices slightly below or above. And the likelihood of equity issuance increases with the ratio of the current price to the historical high price. Furthermore, the likelihood of equity issuance is significantly higher following the months in which the stock hits high. Overall, the evidence suggests that widely available stock price information, the historical peak price, serves as a reference point in managers' financing decisions. |
