Publication Type
Master Thesis
Version
publishedVersion
Publication Date
2009
Abstract
The post-issue underperformance of seasoned equity offering (SEO) is generally explained by asymmetric information and deteriorating operating performance. We complement these traditional explanations with a new parameter, the liquidity, which results from the change of capital structure due to equity offering. The new issuing of equity lowers the debt to asset ratio, lowers the information asymmetry, thus increasing stock liquidity, which is in accordance with the hypotheses presented by Kyle(1985)'s model; Evidence that stocks become more liquid after SEO, thus lower the expected return, resulting to underperformance, combined with the high stock illiquidity before SEO, which coincides the high return, proving that Amihud's (2002) hypothesis about the relation between liquidity and stock is applicable in explaining the stock return puzzle during SEO period.
Keywords
capital structure, illiquidity, seasoned equity offering
Degree Awarded
MSc in Finance
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Supervisor(s)
GOH, Jeremy
Publisher
Singapore Management University
City or Country
Singapore
Citation
YU, Zhao.
Illiquidity, Stock Return and Corporate Capital Structure: Evidence from Seasoned Equity Offering. (2009).
Available at: https://ink.library.smu.edu.sg/etd_coll/20
Copyright Owner and License
Author
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.