The Impact of Regulation on Information Quality and Performance Around Seasoned Equity Offerings : International Evidence

We examine the impact of the enactment of the Market Abuse Directive (MAD) and the Prospectus Directive (PD) across 18 EU countries on seasoned equity offerings (SEOs). Using a difference-in-differences methodology, we document a significant reduction in earnings management, improved post-SEO stock return performance, and a decline in the adverse reaction to SEO announcements following the enactment of MAD. We find similar, albeit weaker, results post-PD. The impact is stronger in countries with high ex-ante institutional quality. Our results suggest that the enactment of these directives leads to improvements in information quality, which reduces information asymmetry around SEOs