Liquidity management around seasoned equity offerings

Siu, David T. L. and Faff, Robert W. (2014) Liquidity management around seasoned equity offerings. Journal of Finance and Financial Services, 1 1: 1-30.

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Name Description MIMEType Size Downloads
Author Siu, David T. L.
Faff, Robert W.
Title Liquidity management around seasoned equity offerings
Journal name Journal of Finance and Financial Services
ISSN 2289-6597
Publication date 2014
Sub-type Article (original research)
Open Access Status
Volume 1
Issue 1
Start page 1
End page 30
Total pages 30
Place of publication Kuala Lumpur, Malaysia
Publisher UKM-GSB Graduate School of Business
Collection year 2015
Language eng
Abstract We investigate firms’ liquidity practices around seasoned equity offerings (SEOs). We broadly classify issuers on the basis of whether the firm belongs to an industry deemed to be financially constrained or unconstrained. We find that constrained-industry issuers tend to save more cash to conserve funding capacity in anticipating investment. Unconstrained industry issuers, in contrast, carry high debt and limited cash reflecting a sizable financial leash. We also find that the former firms experience significant cash stockpiling following new equity issues, whereas for the latter group, there is a significant decline in long-term debt. In the long run, unconstrained issuers who aggressively manage liquidity pre-issue have lower operating profit. However, the relation does not hold for market-based performance because investors, observing the liquidity information, quickly discount stock value at the time of the offering. Rather, post-issue market underperformance can be attributed to investors’ downward revisions relating to the transitory nature of investment opportunities.
Keyword Liquidity management
Seasoned equity offerings
Long run performance
Q-Index Code CX
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Non HERDC
Official Audit
UQ Business School Publications
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Created: Thu, 04 Sep 2014, 13:43:04 EST by Karen Morgan on behalf of UQ Business School