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

Amy Dittmar, Ran Duchin, Shuran Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)254-276
Number of pages23
JournalJournal of Financial Economics
Volume138
Issue number1
DOIs
Publication statusPublished - Oct 2020

Keywords

  • Anchoring
  • Behavioral finance
  • Cash
  • Investment
  • Real effects

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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