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Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using a sample of 1,429 seasoned equity offerings (SEOs) by real estate investment trusts (REITs), we use content analysis to test whether the soft information in a company's offering prospectus influences SEO underpricing. After controlling for relevant variables, we find that companies that use more positive (negative) words in their filings are negatively (positively) related to SEO underpricing. We posit that in REIT SEOs more positive and fewer negative words decrease investor pricing uncertainty (fear) of the offer and as a result experience less underpricing. [ABSTRACT FROM AUTHOR]

We find that market reactions to earnings announcements can be predictable. Four-factor abnormal returns to earnings announcements that follow buyback announcements are higher by 5.1% than similar returns to earnings announcements that follow equity issues over the (− 1,+ 30) window; the difference is 2.2% when unadjusted returns are used. The magnitude is large and economically and statistically significant. The drift in these returns is unrelated and distinct from the post-earnings announcement drift. For example, we find positive drift for firms making buyback announcements even when they exhibit negative earnings surprises and find negative drift for firms issuing equity even when they show positive earnings surprises. Since the study looks at short periods around earnings announcements, it does not suffer from benchmarking errors that may influence long-horizon returns. [ABSTRACT FROM AUTHOR]

Open-market stock repurchase announcements are generally perceived by the stock market as a signal of firm undervaluation. Our study shows that repurchase announcements that were preceded by SEOs of other firms in the same industry within the prior six months (namely SEO-RPs) are more likely the result of lacking investment opportunities than signaling undervaluation, especially in concentrated industries. Specifically, we find investors response negatively to SEO-RP announcements while react positively to regular repurchase announcements. The higher the intensity of SEO activities in the industry, the more negative market reaction to SEO-RP announcements. We argue that the market doesn't expect a repurchase announcement when other rival firms are raising more capital via SEOs. These SEO-RPs represent a negative surprise to the market and lead to a downward adjustment in value of the repurchasing firms in the announcement window. In the three-year post-announcement periods, the SEO-RP firms underperform regular repurchasing firms in both stock return and operating performance. Moreover, while regular repurchasing firms gradually increase their capital expenditures, SEO-RP firms significantly reduce their capital expenditures. These findings support our arguments that repurchase announcements that immediately follow SEOs of rival firms (SEO-RPs) more likely indicate the announcing firms entering a slower growth rate with fewer investment opportunities than signal the undervaluation problem. The underperformance in stock return and operation combined with a significant reduction in capital expenditures in the post-announcement periods are consistent with this logic and also explain why the market reacts negatively to SEO-RP announcements. [ABSTRACT FROM AUTHOR]

We have carried out an event study to investigate stock returns associated with the announcement of equity issues by Brazilian firms between 1992 and 2003 in order to determine market reaction before, during, and after the issue announcement. After measuring abnormal returns by OLS, we used ARCH and GARCH models over 70% of the sample. Our results are remarkably consistent with most of the international empirical literature. Some previous empirical findings have turned up abnormal returns before the announcement date, interpreted as signs of insider information. This evidence also appears in our study as we found an average cumulative abnormal return of –0.01 three weeks before the announcement. With respect to the announcement date, the evidence reported in the literature is virtually unanimous in showing negative abnormal returns, meaning that stock issues convey pessimistic information to the market. Our study confirms these findings with an average – 0.03 cumulative abnormal return on the first three days following the announcement. Finally, the empirical literature has also collected evidence of long-term negative abnormal returns after the issues, which we alsoconfirm, with an abnormal return of –0.28 after one year following the announcement. The results also show that ARCH/GARCH estimation of abnormal returns is superior to OLS estimation.

Accounting restatement is generally viewed as an event that can exacerbate a restating firm's financing environment. We examine restating firms' financing activities in the post-restatement environment. We document significant declines in the frequency of financing activities as well as the dollar amount of net cash provided by financing activities. This suggests that restating firms' ability, and perhaps desire, to raise external funds is impaired by their restatements. We examine three specific equity financing activities: seasoned equity offerings (SEOs), SEO withdrawals, and private investments in public equity (PIPEs). Our findings indicate: (1) The restating firms are much less likely to issue SEOs or PIPEs when their restatements involve accounting irregularity; (2) Although restatements have a negative marginal effect on the cost of issuing SEOs measured by the fee charged by investment agents, the average fee for the post-restatement SEOs and PIPEs are actually lower than other SEOs and PIPEs. Further, restatement has no significant marginal effect on the cost of issuing PIPEs; (3) The decision to withdraw a pre-registered SEO does not appear to be affected by accounting restatement. Overall, our findings suggest that certain group of restatement firms can overcome the presumably unfavorable financing environment inflicted by their accounting restatements. [ABSTRACT FROM AUTHOR]

This paper investigates Seasoned Equity Offering (SEO) cost differences between Europe and the US in the period 1990 to 2011. We find that the direct costs for the US companies are around 40% higher than those for the European companies. Results of this paper are consistent with strategic pricing on the part of investment banks in the US, while the European market is more competitive. However, if the European companies register with the Securities and Exchange Commission in the US, they are also affected by over 25% more in direct costs. [ABSTRACT FROM AUTHOR]

A firm in a steady state generates predictable income and investors can generally agree on its valuation. However, when a significant corporate event occurs this creates greater uncertainty and disagreement about firm valuation, and investors could prefer to avoid holding such a stock. We examine research that has developed financial ratio models to: (a) predict significant corporate events; and (b) predict future performance after significant corporate events. The events we analyze include financial distress and bankruptcy, downsizing, raising equity capital, and material earnings misstatements. We find that financial ratio models generally help investors avoid stocks that are likely to have significant corporate events. We also find that, conditional on a significant event occurring, financial ratio models help investors distinguish good firms from bad. However, we find that research design choices often make it difficult to determine model predictive accuracy. We discuss the role of accounting rule changes and their impact over time on the predictive power of models, and provide suggestions for improving models based on our cross-event analysis. [ABSTRACT FROM AUTHOR]

Do firms' governance provisions affect their terms of obtaining external financing? We hypothesize that it is more difficult for firms with more restrictions on shareholder rights to raise external equity, and that since analyst coverage is an important part of underwriting services, underwriters would use analyst recommendations to promote issuing firms with weaker shareholder rights more strongly and charge them higher underwriting fees. Consistent with our hypothesis, we find that analyst recommendations on issuing firms with weak shareholder rights increase more than those with strong shareholder rights prior to SEOs, and that underwriting spreads are positively related to issuing firms' shareholder rights as proxied by the G-index. Furthermore, the effect of shareholder rights on underwriting fees is largely contained in the six provisions in the E-index. [ABSTRACT FROM AUTHOR]

We examine the long run operating and stock price performance of UK open offer firms in the context of the earnings management hypothesis. We find that in the pre-offer period offer firms report significant improvements in their operating performance unrelated to cash flow performance. Results on return performance show that offer firms outperform various benchmarks in the pre-offer year but underperform up to four years after the offer. Regression results show that pre-offer discretionary current accruals predict the long-run post-offer return underperformance but do not predict the short-run reaction to SEO announcements. Our findings are more consistent with the earnings management hypothesis than with either the timing hypothesis or the managerial response hypothesis and suggest that investors do not take full account of the information available at the time of open offers. [ABSTRACT FROM AUTHOR]

Copyright of Baltic Journal of Road & Bridge Engineering (Baltic Journal of Road & Bridge Engineering) is the property of Baltic Journal of Road & Bridge Engineering and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper examines the stock market performance of a large sample of new issues (IPOs and SEOs) following an extreme price movement during the first three years after the offering. Strong underperformance follows either a positive or negative (at least +/−15%) one-day return event. This poor performance cannot be explained by the Fama-French four-factor methodology, or by the generally low stock returns of growth firms. Unlike recent issuers, non-issuers report no poor performance following a similar extreme event using the four-factor methodology. The extreme event date shows very high levels of turnover, a measure of divergence of opinion. Finally, there is a strong negative linkage between higher levels of divergence of opinion and subsequent stock performance. [ABSTRACT FROM AUTHOR]