SEO announcement returns and internal capital market efficiency

    Authors

    A. Akhigbe;A. M. Whyte

    Comments

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    Abbreviated Journal Title

    J. Corp. Financ.

    Keywords

    Seasoned equity offerings; Internal capital market efficiency; Diversified firms; Multiple segment firms; Follow-on offerings; SEASONED EQUITY OFFERINGS; CORPORATE DIVERSIFICATION; PRICE DYNAMICS; FIRMS; INFORMATION; INVESTMENT; EVENT; STOCK; PERFORMANCE; ISSUES; Business, Finance

    Abstract

    We test the hypothesis that efficient internal capital markets mitigate the negative announcement returns surrounding seasoned equity offerings (SEOs). Our predictions are based on the argument that efficiency reduces uncertainty regarding the value of assets-in-place. Having established the inverse association between our efficiency measures and uncertainty, we show that the efficiency measures are positively associated with SEO announcement returns, particularly among firms with multiple segment codes. The positive relation suggests that efficiency mitigates uncertainty regarding the value of assets-in-place, and this is the channel through which more favorable announcement returns are produced in response to the SEOs of high efficiency firms. (C) 2015 Elsevier B.V. All rights reserved.

    Journal Title

    Journal of Corporate Finance

    Volume

    31

    Publication Date

    1-1-2015

    Document Type

    Article

    Language

    English

    First Page

    271

    Last Page

    283

    WOS Identifier

    WOS:000353602400015

    ISSN

    0929-1199

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