Offer-price discount of bank seasoned equity offers: do voluntary and involuntary offers convey different information?

Ozgur Ergungor (), C. N. V. Krishnan, Ajai K. Singh and Allan A. Zebedee

No 515, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: Seasoned equity offers made by undercapitalized banks (labeled involuntary offers) could be different from other seasoned equity offers because the issuer is presumably under regulatory duress to make up the shortfall in required capital. For this reason, involuntary offers may exhibit limited managerial opportunism. When a firm issues seasoned equity, investment bankers gather information about the issuer in the period between the registration of the offer and its issue date. The information gathered during the book-building process gets reflected in the offer price discount on the issue date. We find that the offer price discount appears to convey more information to investors on the issue date for the voluntary issuers. However, we find that both types of issues show signs of market timing, and that investors react negatively to both types of issuance announcements. Our results are robust to several checks.

Keywords: Bank; stocks (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-fmk
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DOI: 10.26509/frbc-wp-200515

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