Wadhwa, K, Nagi Reddy, V, Goyal, A et al. (1 more author) (2016) IPOs and SEOs, real investments, and market timing: Emerging market evidence. Journal of International Financial Markets, Institutions and Money, 45. pp. 21-41. ISSN 1042-4431
Abstract
This study uses market-to-book ratio decomposition to examine whether firms that issue equity through initial public offerings or seasoned equity offerings exploit mispricing because of investor enthusiasm or to finance growth opportunities. We find strong evidence that, on average, firms do not issue mispriced stocks to exploit investors but, rather, to finance their investment opportunities in the form of real assets, inventory, and capital expenses. Firms that issue overvalued stocks with the view to increase their cash holdings experience poor long-run performance. Overall, our results show that stock mispricing drives equity offerings through IPOs and SEOs. Nonetheless, high transparency and balanced regulation in the marketplace deter issuing firms from investing their proceeds in non-value-creating activities. This evidence is robust to alternative measures of valuation and long-run performance.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2016 Elsevier B.V. This is an author produced version of a paper published in Journal of International Financial Markets, Institutions and Money. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | IPOs; SEOs; Market-timing; Investment funding; Market-to-book ratio; Residual income model; Long-run performance |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 21 Jun 2019 09:33 |
Last Modified: | 03 Jul 2019 01:12 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.intfin.2016.05.007 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:147577 |
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Filename: IPOs and SEOs, Real Investments, and Market Timing_Emerging Market Evidence.pdf
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