The long-run performance of secondary equity issues: A test of the windows of opportunity hypothesis

Jonathan Clarke, Craig Dunbar, Kathleen Kahle

Research output: Contribution to journalArticle

32 Scopus citations

Abstract

We examine long-run stock and operating performance following secondary equity offerings. For a subsample of issuers in which the seller is an insider, both 3- and 5-year post-issue abnormal stock returns are significantly negative. The findings are robust to alternative long-run abnormal return measurement methodologies. The abnormal returns are large relative to the initial market reaction (the mean 5-year abnormal returns is -33.33%). The operating performance of these firms also declines subsequent to the issue. This supports the hypothesis that the negative performance of secondary equity offerings can be attributed to managers exploiting "windows of opportunity" by issuing overvalued shares.

Original languageEnglish (US)
Pages (from-to)575-603
Number of pages29
JournalJournal of Business
Volume77
Issue number3
DOIs
StatePublished - Jul 1 2004

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

Fingerprint Dive into the research topics of 'The long-run performance of secondary equity issues: A test of the windows of opportunity hypothesis'. Together they form a unique fingerprint.

Cite this