Market Reactions at the Equity Offerings Announcement: A Short Window Event Study

Abstract

This study measures the average abnormal stock returns (AAR) at the announcement of equity issuance of 150 US companies during the period of 1999-2012. The study finds negative average abnormal stock returns which are statistically significant at 1 percent level. It also runs a cross-sectional regression considering AAR as dependent variable and six variables, categorized as security specific, firm specific and macroeconomic variables, as independent variables. The regression outcome shows a significant negative relation between AAR and past average stock returns whereas it shows significant positive relations between AAR and other variables such as change in capital expenditure, firm’s profitability and Treasury bill rate.