Seo Announcement Returns And Internal Capital Market Efficiency

Keywords

Diversified firms; Follow-on offerings; Internal capital market efficiency; Multiple segment firms; Seasoned equity offerings

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.

Publication Date

4-1-2015

Publication Title

Journal of Corporate Finance

Volume

31

Number of Pages

271-283

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.jcorpfin.2015.02.006

Socpus ID

84924989433 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84924989433

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