Publication Type

Master Thesis

Publication Date



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.


capital structure, illiquidity, seasoned equity offering

Degree Awarded

MSc in Finance


Finance and Financial Management | Portfolio and Security Analysis


GOH, Jeremy

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.