재무연구 제 권 호 (2014년 11월)
Asian Review of Financial Research, Vol., No..
pp.403~455
pp.403~455
How are Proceeds from Seasoned Equity Offerings Used?
E. Han Kim Everett E. Berg Professor of Finance at the University of Michigan, Ross School of Business, Ann Arbor, Michigan 48109
Heuijung Kim A doctoral candidate at Sungkyunkwan University, SKK Business School, Seoul, Korea
Yuan Li A graduate student at Tsinghua University School of Economics and Management, Beijing, China
Yao Lu Associate Professor of Finance at Tsinghua University School of Economics and Management, Beijing, China
We find that both investment and compensation policies become less efficient following seasoned equity offerings. During the year of SEO and the following year, the shareholder return-to-investment sensitivity decreases, the likelihood of overinvestment increases, and acquisition announcement returns decrease. At the same time, top officers’ and directors’ compensation increases, their pay-for-performance sensitivity decreases, and firm value decreases. These post-SEO changes are significantly related to investor reactions at the time of SEO announcements. Our results are based on publicly-listed Chinese firms over the period 2000 to 2012, which experienced exogenous regulatory shocks on the eligibility to issue SEOs. The shocks allow construction of instruments to address endogeneity issues. Our findings imply that SEO proceeds, on average, are used unproductively for shareholders and provide private benefits to management.
E. Han Kim
Heuijung Kim
Yuan Li
Yao Lu
We find that both investment and compensation policies become less efficient following seasoned equity offerings. During the year of SEO and the following year, the shareholder return-to-investment sensitivity decreases, the likelihood of overinvestment increases, and acquisition announcement returns decrease. At the same time, top officers’ and directors’ compensation increases, their pay-for-performance sensitivity decreases, and firm value decreases. These post-SEO changes are significantly related to investor reactions at the time of SEO announcements. Our results are based on publicly-listed Chinese firms over the period 2000 to 2012, which experienced exogenous regulatory shocks on the eligibility to issue SEOs. The shocks allow construction of instruments to address endogeneity issues. Our findings imply that SEO proceeds, on average, are used unproductively for shareholders and provide private benefits to management.
