The timing and consequences of seasoned equity offerings: A regression discontinuity approach

The likelihood of seasoned equity offerings (SEOs) jumps discontinuously when the stock price equals the most recent equity offer price. Anchoring on the last offer price holds after considering executive turnovers, stock splits, earnings management, or dividend adjustments. Using a fuzzy regression...

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Bibliographic Details
Published in:	Journal of financial economics 2020-10, Vol.138 (1), p.254-276
Main Authors:	Dittmar, Amy, Duchin, Ran, Zhang, Shuran
Format:	Article
Language:	eng
Subjects:	Anchoring Behavioral finance Cash Discontinuity Earnings Employment Equity Fuzzy Investment Prices Randomness Real effects Securities markets Stock prices Timing
Online Access:	Get full text
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Summary:	The likelihood of seasoned equity offerings (SEOs) jumps discontinuously when the stock price equals the most recent equity offer price. Anchoring on the last offer price holds after considering executive turnovers, stock splits, earnings management, or dividend adjustments. Using a fuzzy regression discontinuity design around this cutoff, which exploits local randomness in stock prices, we investigate the consequences of anchoring in SEOs. We find significant increases in cash holdings and acquisitions of lower quality, with no real effects on investment or employment. Overall, we provide some of the cleanest estimates, to date, of the timing and causal effects of SEOs.
ISSN:	0304-405X 1879-2774