The Operating Performance of Firms Conducting Seasoned Equity Offerings

Journal of Finance, Vol. 52 No. 4, December 1997

Posted: 12 Apr 1998

See all articles by Tim Loughran

Tim Loughran

University of Notre Dame

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

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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.

JEL Classification: G12, G14

Suggested Citation

Loughran, Tim and Ritter, Jay R., The Operating Performance of Firms Conducting Seasoned Equity Offerings. Journal of Finance, Vol. 52 No. 4, December 1997, Available at SSRN: https://ssrn.com/abstract=52822

Tim Loughran

University of Notre Dame ( email )

Department of Finance
245 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-8432 (Phone)
574-631-5255 (Fax)

Jay R. Ritter (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://https://site.warrington.ufl.edu/ritter

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