Seasoned equity offerings, operating performance and overconfidence: Evidence from the UK

Andrikopoulos, Panagiotis

doi:10.1016/j.jeconbus.2008.09.002

Cited by 17 publications

(8 citation statements)

References 47 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Companies have reasons to issue shares when their market price is overvalued. The weight of evidence to date is that long-run average abnormal returns following UK rights issues, open offers and placings are negative, though the results are sensitive to the methodology (Ho, 2005;Iqbal et al, 2009); also, operating performance following rights issues is disappointing on average (Andrikopoulos, 2009). Our inference of heterogeneous valuations is consistent with the evidence in Bagwell (1992).…”

Section: Evidence On All Buyerssupporting

confidence: 70%

Block Buying and Choice of Issue Method in UK Seasoned Equity Offers

Armitage

2009

SSRN Journal

View full text Add to dashboard Cite

Much of the new equity declined by existing shareholders in UK SEOs is bought in a few large blocks, both by other existing holders and by new investors. The paper argues that a placing process via negotiation with investors facilitates the purchase of large blocks better than the alternative method of selling rights on the market, and that this helps to explain the decline of rights issues in the UK. Other explanations for use of the placing method appear to be of limited relevance, except perhaps certificaton of issuer value.

show abstract

Section: Evidence On All Buyerssupporting

confidence: 70%

Block Buying and Choice of Issue Method in UK Seasoned Equity Offers

Armitage

2009

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…First, if managers suffer from hubris or empire-building tendencies, they may pursue growth in company size rather than earnings, and accept negative NPV projects (e.g., Andrikopoulos, 2009). However, we would suggest it is doubtful whether the present system of corporate governance could have survived if there was no link at all between investment decisions and shareholder interests.…”

Section: Resultsmentioning

confidence: 99%

The growth companies puzzle: can growth opportunities measures predict firm growth?

Danbolt

Hirst

Jones

2011

The European Journal of Finance

View full text Add to dashboard Cite

While numerous empirical studies include proxies for growth opportunities in their analyses, there is limited evidence as to the validity of the various growth proxies used. Based on a sample of 1,942 firm years for listed UK companies over the period 1990 to 2004, we assess the performance of eight growth opportunities measures. Our results show that while all the growth measures show some ability to predict growth in company sales, total assets or equity, there are substantial differences between the various models. In particular, Tobin's Q performs poorly while dividend based measures generally perform best. However, none of the measures has any success in predicting earnings per share growth, even when controlling for mean reversion and other time-series patterns in earnings. We term this the 'growth companies puzzle'. Growth companies do grow, but they do not grow in the key dimension (earnings) theory predicts. Whether the failure of 'growth companies' to deliver superior earnings growth is attributable to increased competition, poor investments, or behavioural biases, it is still a puzzle why growth companies on average fail to deliver superior earnings growth.

show abstract

“…Companies have reasons to issue shares when their market price is overvalued. The weight of evidence to date is that long-run average abnormal returns following UK rights issues, open offers and placings are negative, though the results are sensitive to the methodology (Ho, 2005;and Iqbal et al, 2009); also, operating performance following rights issues is disappointing on average (Andrikopoulos, 2009). Our inference of heterogeneous valuations is consistent with the evidence in Bagwell (1992).…”

Section: (B) Decisions Of Existing Shareholders: Evidence For Heterogmentioning

confidence: 99%