Market Timing of Seasoned Equity Offerings with Long Regulative Process

43 Pages Posted: 3 Feb 2016 Last revised: 30 Dec 2017

See all articles by Yong Huang

Yong Huang

School of Accounting, Zhongnan University of Economics and Law

Konari Uchida

Kyushu University - Faculty of Economics

Daolin Zah

School of Economics and Management,China University of Geosciences

Date Written: January 12, 2016

Abstract

A long regulative process exists between the initial announcement and execution of seasoned equity offerings (SEOs) in China. Although the initial announcement of an SEO is associated with a significant reduction in the stock price, the regulator (China Securities Regulatory Commission) finally approves it after a significant run up in the price of the stock. Chinese managers execute SEOs after additional stock price increases. As a result, the stock price at issuance is not significantly different from the price on announcement, and is significantly higher than the price three months before the announcement. We also find stock prices decline following the execution. These results suggest regulative screenings for market stabilization are beneficial for SEO market timing, and that Chinese managers successfully time the market, even with a prolonged regulative process.

Keywords: Seasoned equity offering; Market timing; Regulative screening; Event study; China

JEL Classification: G14; G32

Suggested Citation

Huang, Yong and Uchida, Konari and Zah, Daolin, Market Timing of Seasoned Equity Offerings with Long Regulative Process (January 12, 2016). Journal of Corporate Finance, Vol. 39, 2016, Asian Finance Association (AsianFA) 2016 Conference, Available at SSRN: https://ssrn.com/abstract=2726227 or http://dx.doi.org/10.2139/ssrn.2726227

Yong Huang (Contact Author)

School of Accounting, Zhongnan University of Economics and Law ( email )

182,Nanhu Road
Hongshan
Wuhan, Hubei 430073
China

Konari Uchida

Kyushu University - Faculty of Economics ( email )

744 Motooka
Nishiku
Fukuoka, Fukuoka 8190395
Japan

Daolin Zah

School of Economics and Management,China University of Geosciences ( email )

385 Lumo Road
Hongshan
Wuhan, Hubei 430074
China
13607160256 (Phone)

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