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 language | English |
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Pages (from-to) | 254-276 |
Number of pages | 23 |
Journal | Journal of Financial Economics |
Volume | 138 |
Issue number | 1 |
DOIs | |
Publication status | Published - Oct 2020 |
Keywords
- Anchoring
- Behavioral finance
- Cash
- Investment
- Real effects
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management