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Announcement Effect of Primary Seasoned Equity Offerings of Common Stock: Evidence from the Swedish Stock Market

Reynisdóttir, Anna Jóna LU and Özurardóttir, Guðrún LU (2023) NEKN02 20231
Department of Economics
Abstract
This study investigates the abnormal returns associated with announcements of primary seasoned equity offerings of common stock on the Swedish stock market. It provides a comprehensive discussion on equity offerings and their related theories, in addition to a thorough review of existing empirical research. Based on our event study analysis of data on rights and directed offerings for firms listed on Nasdaq Stockholm from 2018 to 2022, we identify a significant positive abnormal return of 1.09% during the three-day period surrounding the event day, on average. Our analysis further suggests that investors exhibit a tendency to overreact to seasoned equity announcements. Our cross-sectional regression analysis provides evidence in support of... (More)
This study investigates the abnormal returns associated with announcements of primary seasoned equity offerings of common stock on the Swedish stock market. It provides a comprehensive discussion on equity offerings and their related theories, in addition to a thorough review of existing empirical research. Based on our event study analysis of data on rights and directed offerings for firms listed on Nasdaq Stockholm from 2018 to 2022, we identify a significant positive abnormal return of 1.09% during the three-day period surrounding the event day, on average. Our analysis further suggests that investors exhibit a tendency to overreact to seasoned equity announcements. Our cross-sectional regression analysis provides evidence in support of the Wealth Transfer hypothesis. Specifically, we observe that firms with higher debt-to-asset ratios experience a significantly reduced positive market reaction around the announcement date. Furthermore, our findings do not provide support for the Unanticipated Announcement hypothesis, the Signaling hypothesis, the Agency Costs of Free Cash Flow hypothesis, nor the Price Pressure hypothesis. (Less)
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author
Reynisdóttir, Anna Jóna LU and Özurardóttir, Guðrún LU
supervisor
organization
course
NEKN02 20231
year
type
H1 - Master's Degree (One Year)
subject
keywords
Seasoned equity offering, Swedish stock market, primary offering, equity issue, financing, increase in share capital, wealth transfer
language
English
id
9119212
date added to LUP
2023-11-24 08:57:23
date last changed
2023-11-24 08:57:23
@misc{9119212,
  abstract     = {{This study investigates the abnormal returns associated with announcements of primary seasoned equity offerings of common stock on the Swedish stock market. It provides a comprehensive discussion on equity offerings and their related theories, in addition to a thorough review of existing empirical research. Based on our event study analysis of data on rights and directed offerings for firms listed on Nasdaq Stockholm from 2018 to 2022, we identify a significant positive abnormal return of 1.09% during the three-day period surrounding the event day, on average. Our analysis further suggests that investors exhibit a tendency to overreact to seasoned equity announcements. Our cross-sectional regression analysis provides evidence in support of the Wealth Transfer hypothesis. Specifically, we observe that firms with higher debt-to-asset ratios experience a significantly reduced positive market reaction around the announcement date. Furthermore, our findings do not provide support for the Unanticipated Announcement hypothesis, the Signaling hypothesis, the Agency Costs of Free Cash Flow hypothesis, nor the Price Pressure hypothesis.}},
  author       = {{Reynisdóttir, Anna Jóna and Özurardóttir, Guðrún}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Announcement Effect of Primary Seasoned Equity Offerings of Common Stock: Evidence from the Swedish Stock Market}},
  year         = {{2023}},
}