Publication Type
Journal Article
Version
acceptedVersion
Publication Date
9-2013
Abstract
We examine the influence of SEC's Rule 105 on informed trading and the information content of stock prices around an SEO's offer day. We show that constraints on short sales inhibit informed trading and hamper incorporation of information into stock prices for offers whose traders have private adverse information and without options listing. The constraints contribute to increased price uncertainty and higher market sensitivity to seller-initiated trading. After controlling for other causes of SEO discounts, we find that the decrease in information content of stock prices just before an offer day has a significant impact on the SEO's value discount.
Keywords
Short sales constraint, Information content of stock prices, Seasoned equity offering (SEO), SEC Rule 105
Discipline
Finance and Financial Management
Research Areas
Finance
Publication
International Review of Financial Analysis
Volume
29
First Page
107
Last Page
118
ISSN
1057-5219
Identifier
10.1016/j.irfa.2013.04.001
Publisher
Elsevier
Citation
CHAROENWONG, Charlie; DING, David K.; and WANG, Ping.
Short sales constraint and SEO pricing. (2013). International Review of Financial Analysis. 29, 107-118.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3600
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.irfa.2013.04.001