Seasoned Equity Offerings in Taiwan：Short-term and long-term stock performance

• Main Authors: Lin Chun I, 林純夷
• Other Authors: Li Rong-Jen
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/33x2pr

碩士 === 長榮大學 === 經營管理研究所 === 97 === The purpose of this study examines the short-term and long-term stock performance of seasoned equity offerings (SEO) in Taiwan. This study finds that the market value of existing equity rise on the announcement of a new issue of common stock. That is, the announcement effect is positive. This result shows that Taiwan market interprets the equity issues as implying a new positive net present value (NPV) project will be undertaken. The issuing firms can convince the market that there is a good reason for issuing equity. However, there is virtually no movement in the abnormal returns in the days following the announcement. This implies that the SEO news is fully incorporated into the stock price by the announcement day, a result consistent with some degree of market efficiency. The annual return on SEOs in the three years after issuing are reported, along with benchmark returns using either size or style (BV/MV, book value/market value) matching. This study shows that SEOs have underperformed other firms of the same size and same BV/MV ratio by an average of 8.14% per year during the three years after issuing, not including the first-day return. Thus, the evidence in this study suggest that corporate managers are able to issue SEOs when the company’s stock is overpriced. In other words, managers appear to time the market successfully.