Journal
JOURNAL OF CORPORATE FINANCE
Volume 39, Issue -, Pages 278-294Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jcorpfin.2016.05.001
Keywords
Seasoned equity offering; Market timing; Regulative screening; Event study; China
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Funding
- JSPS KAKENHI Grant [15H03367]
- JSPS Core-to-Core Program, A. Advanced Research Networks
- Grants-in-Aid for Scientific Research [15H03367] Funding Source: KAKEN
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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 that 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. (C) 2016 Elsevier B.V. All rights reserved.
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