Hostname: page-component-f554764f5-fnl2l Total loading time: 0 Render date: 2025-04-13T01:09:55.712Z Has data issue: false hasContentIssue false
  • English
  • Français

Long-Run Performance and Insider Trading in Completed and Canceled Seasoned Equity Offerings

Published online by Cambridge University Press:  06 April 2009

Jonathan Clarke ,
Craig Dunbar  and
Kathleen M. Kahle
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to competed and canceled SEOs, but declines afferward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For Canceled sEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in dence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 36 , Issue 4 , December 2001 , pp. 415 - 430
Copyright
Copyright © School of Business Administration, University of Washington 2001

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Alderson, M. J., and Betker, B. L.. “The long-Run Performance of Companies that Withdraw Seasoned Equity Offerings.” Journal of Financial Research, 23 (2000), 157–179.CrossRefGoogle Scholar
Barber, B., and Lyon, J., “Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics.” Journal of Financial Economics, 43 (1997), 341–372.CrossRefGoogle Scholar
Clarke, K.; Dunbar, C.; and Kahle, K.. “The Long-Run Performance of Secondary Equity Issues: A Test of the Windows of Opportunity Hypothesis.” Working Paperr, Univ. of Pittsburgh (2001).Google Scholar
Dunbar, C. “The Choice between Firm-Commitment and Best-Efforts Offering Methods in IPOs: The Effect of Unsuccessful Offers.” Journal of Financial Intermediation, 7 (1998), 60–90.CrossRefGoogle Scholar
Dunbar, C. “Factors Affecting Investment Bank Initial Public Offering Market Shar.” Journal of Financial Economics, 55 (2000), 3–41.CrossRefGoogle Scholar
Ikenberry, D.; Lakonishok, J.; and Vermaelen, T.. “Market Underreaction to Open Market Share Repurchases.” Journal of Financial Economics, 42 (1996), 159–185.Google Scholar
Kahle, K. “Insider Trading and the Long-Run Performance of New Security Issues.” Journal of corporate Finance, 6 (2000), 25–54.CrossRefGoogle Scholar
Karpoff, K. M., and Lee, D.. “Insider Trading before New Issue Announcements.” Financial Management, 20 (1991), 18–26.CrossRefGoogle Scholar
Lakonishok, J., and Lee, I.. “Are Insiders' Trads Informative?“ Review of Financial Studies, 14 (2001), 89–111.CrossRefGoogle Scholar
Lee, I. “Do Firms Knowingly Sell Overvalued Equity?“ Kournal of Fiance, 52 (1997), 1439–1466.Google Scholar
Loughran, T., and Ritter, J.. “The New Issues Puzzle.” Journal of Fiance, 50 (1995), 23–51.CrossRefGoogle Scholar
Lyon, J.; Barber, B. and Tsai, c.-L.. “Improved Methods for Tests of Long-Run Abnormal Stock Returns.” Journal of Finance, 54 (1999), 165–201.CrossRefGoogle Scholar
Mikkelson, W. H., and Partch, M. M.. “Withdrawn Security Offerings.” Journal of Financial and Ouantitative Analysis, 23 (1988), 119–133.Google Scholar
Pettit, R., and Venkatesh, . “Insider Trading and Long-Run Return Performance.” Financial Management, 24 (1995), 88–103.CrossRefGoogle Scholar
Seyhun, H. N. “Insiders' Profits, Costs of Trading and Market Efficiency.” Journal of Financial Economics, 16 (1986), 189–212.CrossRefGoogle Scholar
Seyhun, H. N. “Overreaction or Fundamentals: Some Lessons from Insiders Responses to the Market Crash of 1987.” Journal of Finance, 45 (1990), 1363–1388.CrossRefGoogle Scholar
Spiess, D. K., and Affleck-Graves, J.. “Underperformance in Long-Run Stock Returns following Seasoned Equity Offerings.” Journal of Financial Economics, 38 (1995), 243–267.CrossRefGoogle Scholar