Seasoned equity offerings, market timing, and the corporate lifecycle
Both a firm's market-timing opportunities and its corporate lifecycle stage exert statistically and economically significant influences on the probability that it conducts a seasoned equity offering (SEO), with the lifecycle effect empirically stronger. Neither effect adequately explains SEO decisions because a near-majority of issuers are not growth firms and the vast majority of firms with high M/B ratios and high recent and poor future stock returns fail to issue stock. Since without the offer proceeds 62.6% of issuers would run out of cash (81.1% would have subnormal cash balances) the year after the SEO, a near-term cash need is the primary SEO motive, with market-timing opportunities and lifecycle stage exerting only ancillary influences.
Year of publication: |
2010
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Authors: | DeAngelo, Harry ; DeAngelo, Linda ; Stulz, René M. |
Published in: |
Journal of Financial Economics. - Elsevier, ISSN 0304-405X. - Vol. 95.2010, 3, p. 275-295
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Publisher: |
Elsevier |
Keywords: | Seasoned equity offerings (SEOs) Market timing Corporate lifecycle Cash balances |
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