The Operating Performance of Firms Conducting Seasoned Equity Offerings

Tim Loughran
Department of Finance
108 PBAB
University of Iowa
Iowa City, Iowa 52242-1000
(319) 335-0882
Tim-Loughran@uiowa.edu

and

Jay R. Ritter
Department of Finance
Business Administration 327
University of Florida
Gainesville FL 32611-7168
(352) 846-2837
jay.ritter@cba.ufl.edu

July 3, 1997

Abstract

Recent studies have documented that firms conducting seasoned equity offerings have inordinately low stock returns during the five years after the offering, following a sharp run-up in the year prior to the offering. This paper documents that the operating performance of issuing firms shows substantial improvement prior to the offering, but then deteriorates. The multiples at the time of the offering, however, do not reflect an expectation of deteriorating performance. Issuing firms are disproportionately high-growth firms, but issuers have much lower subsequent stock returns than nonissuers with the same growth rate.

.PDF format - View the paper with Acrobat Viewer
Download the paper as a Word 7.0 file

Jay R. Ritter

Finance Department Working Papers

Finance Home Page

College of Business Home Page