A comprehensive study of liquidity before and after SEOs and SEO underpricing

Yan He; Junbo Wang; K.C. John Wei

doi:10.1016/j.finmar.2014.03.004

Author(s)

Yan He
Junbo Wang
K.C. John Wei

Related Research Unit(s)

Department of Economics and Finance

Detail(s)

Original language	English
Pages (from-to)	61-78
Journal / Publication	Journal of Financial Markets
Volume	20
Online published	16 May 2014
Publication status	Published - Sept 2014

Link(s)

DOI	DOI https://doi.org/10.1016/j.finmar.2014.03.004 Final Published version
	Check@CityULib
Link to Scopus	https://www.scopus.com/record/display.uri?eid=2-s2.0-84906265512&origin=recordpage
Permanent Link	https://scholars.cityu.edu.hk/en/publications/publication(7306669a-8d1c-4157-a282-fd1eb3e449a5).html

Abstract

We comprehensively study various measures of stock trading liquidity around seasoned equity offerings (SEOs) and SEO underpricing using a sample of 3,811 SEOs, made from 1997 to 2012, and a matched non-SEO sample. We find that all liquidity measures of SEO firms improve significantly after SEO events. Furthermore, the magnitudes of reductions in transaction cost measures of illiquidity are significantly associated with relative offer size, the change in stock price, and the change in volatility with expected signs. Most importantly, a smaller magnitude of SEO underpricing is significantly and positively associated with a larger reduction in transaction cost measures of illiquidity. © 2014 Elsevier B.V.