Long-run performance and insider trading in completed and canceled seasoned equity offerings

Jonathan Clarke; Craig Dunbar; Kathleen M. Kahle

doi:10.2307/2676218

Long-run performance and insider trading in completed and canceled seasoned equity offerings

Jonathan Clarke, Craig Dunbar, Kathleen M. Kahle

Finance

Research output: Contribution to journal › Article › peer-review

70 Scopus citations

Abstract

This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to completed and canceled SEOs, but declines afterward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For canceled SEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in insider trading around SEO filing affect the probability of cancellation. Overall, the evidence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.

Original language	English (US)
Pages (from-to)	415-430
Number of pages	16
Journal	Journal of Financial and Quantitative Analysis
Volume	36
Issue number	4
DOIs	https://doi.org/10.2307/2676218
State	Published - Dec 2001

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

Access to Document

10.2307/2676218

Cite this

@article{f246568c65674ee4be180f8b13cb132a,

title = "Long-run performance and insider trading in completed and canceled seasoned equity offerings",

abstract = "This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to completed and canceled SEOs, but declines afterward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For canceled SEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in insider trading around SEO filing affect the probability of cancellation. Overall, the evidence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.",

author = "Jonathan Clarke and Craig Dunbar and Kahle, {Kathleen M.}",

note = "Funding Information: Clarke, jonathan.clarke@mgt.gatech.edu, Georgia Institute of Technology, DuPree College of Management, Atlanta, GA 30332; Kahle, kkahle@katz.pitt.edu, University of Pittsburgh, Katz Graduate School of Business, Pittsburgh, PA 15260; Dunbar, cdunbar@ivey.uwo.ca, University of Western Ontario, Richard Ivey School of Business, London, Ontario, N6A 3K7, Canada. This work was begun while Clarke and Dunbar were at the Katz Graduate School of Business at the University of Pittsburgh. Research support from the Institute for Industrial Competitiveness at the University of Pittsburgh is gratefully acknowledged. We thank Ken Lehn, D. Scott Lee and H. Nejat Seyhun (the referees), and seminar participants at Case Western Reserve University, the University of Toronto, and the 1999 Eastern Finance Association Meeting in Miami Beach for their comments.",

year = "2001",

month = dec,

doi = "10.2307/2676218",

language = "English (US)",

volume = "36",

pages = "415--430",

journal = "Journal of Financial and Quantitative Analysis",

issn = "0022-1090",

publisher = "Cambridge University Press",

number = "4",

}

TY - JOUR

T1 - Long-run performance and insider trading in completed and canceled seasoned equity offerings

AU - Clarke, Jonathan

AU - Dunbar, Craig

AU - Kahle, Kathleen M.

N1 - Funding Information: Clarke, jonathan.clarke@mgt.gatech.edu, Georgia Institute of Technology, DuPree College of Management, Atlanta, GA 30332; Kahle, kkahle@katz.pitt.edu, University of Pittsburgh, Katz Graduate School of Business, Pittsburgh, PA 15260; Dunbar, cdunbar@ivey.uwo.ca, University of Western Ontario, Richard Ivey School of Business, London, Ontario, N6A 3K7, Canada. This work was begun while Clarke and Dunbar were at the Katz Graduate School of Business at the University of Pittsburgh. Research support from the Institute for Industrial Competitiveness at the University of Pittsburgh is gratefully acknowledged. We thank Ken Lehn, D. Scott Lee and H. Nejat Seyhun (the referees), and seminar participants at Case Western Reserve University, the University of Toronto, and the 1999 Eastern Finance Association Meeting in Miami Beach for their comments.

PY - 2001/12

Y1 - 2001/12

N2 - This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to completed and canceled SEOs, but declines afterward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For canceled SEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in insider trading around SEO filing affect the probability of cancellation. Overall, the evidence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.

AB - This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to completed and canceled SEOs, but declines afterward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For canceled SEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in insider trading around SEO filing affect the probability of cancellation. Overall, the evidence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.

UR - http://www.scopus.com/inward/record.url?scp=0035732821&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0035732821&partnerID=8YFLogxK

U2 - 10.2307/2676218

DO - 10.2307/2676218

M3 - Article

AN - SCOPUS:0035732821

SN - 0022-1090

VL - 36

SP - 415

EP - 430

JO - Journal of Financial and Quantitative Analysis

JF - Journal of Financial and Quantitative Analysis

IS - 4

ER -

Long-run performance and insider trading in completed and canceled seasoned equity offerings

Abstract

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this