Firm characteristics, market conditions, and the pattern of performance after seasoned equity offers

This paper uses a characteristics-based approach to examine the pattern of abnormal returns after seasoned equity offerings. Unlike previous studies the risk class of issuers are allowed to change in each of a series of six-month holding periods and firms are classified into categories based on performance measures, the use of proceeds and market conditions at the time of issue. This methodology reveals that negative abnormal returns persist for only about 3.5 years on average following offers and are driven by the 37% of firms that reduce capital spending. These and other results suggest that post-issue abnormal returns vary in a way that is consistent with quasi-efficient capital markets.