Journal of Banking & Finance Vol. 36 No. 10 2012
Does liquidity risk explain low firm performance following seasoned equity offerings?
open access
Abstract
A seasoned equity offering (SEO) can improve a firm’s stock liquidity and lower its cost of capital. This paper examines whether SEO firms achieve a liquidity gain and the sources of this gain. It explores the role of liquidity risk in explaining SEO long-run performance. The evidence shows that SEO firms experience significant post-issue improvements in liquidity and reductions in liquidity risk. Size and book-to-market matching fails to control for these liquidity effects, generating the low long-term post-SEO performance documented in the literature. After adjusting for liquidity risk, SEO firms show normal long-term performance.
- DOI
- 10.1016/j.jbankfin.2012.07.009
- Volume
- 36
- Issue
- 10
- Pages
- 2770-2785
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib