Submitted manuscript, 709 KB, PDF document
Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - Does liquidity risk explain low firm performance following seasoned equity offerings?
AU - Bilinski, Pawel
AU - Strong, Norman
AU - Liu, Weimin
PY - 2011
Y1 - 2011
N2 - By making seasoned equity offerings (SEO), firms can improve the liquidity of their shares and lower their costs of capital. This paper examines whether SEO firms achieve such a liquidity gain and explores the role of liquidity risk in explaining their long-run performance. Consistent with predictions, 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. SEO firms show normal long-term performance after adjusting for liquidity risk.
AB - By making seasoned equity offerings (SEO), firms can improve the liquidity of their shares and lower their costs of capital. This paper examines whether SEO firms achieve such a liquidity gain and explores the role of liquidity risk in explaining their long-run performance. Consistent with predictions, 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. SEO firms show normal long-term performance after adjusting for liquidity risk.
M3 - Working paper
BT - Does liquidity risk explain low firm performance following seasoned equity offerings?
PB - Lancaster University
CY - Lancaster
ER -