The Effects of Operational Structure Change on Performance after Seasoned Equity Offerings

Chihyoun Ahn, Mi-Ok Kim and Hyung-Rok Jung
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Chihyoun Ahn: School of Management, Kyung Hee University, 26, Kyungheedae-ro, Dongdaemun-gu, Seoul 02447, Korea
Mi-Ok Kim: Department of Tax Accounting, Baewha Women’s University, #2505 Jung Sim Kwan, 34 1st street, Pirundaero, Jongno-gu, Seoul 03039, Korea
Hyung-Rok Jung: School of Management, Kyung Hee University, 26, Kyungheedae-ro, Dongdaemun-gu, Seoul 02447, Korea

Sustainability, 2017, vol. 10, issue 1, 1-17

Abstract: Sustainability is directly linked to firms’ survival in competitive markets. To survive, firms need extra capital, and seasoned equity offerings (SEOs) are one sustainability strategy. Additional resources from SEOs lead to changes in firms’ operational structure, which brings future sustainability. This study investigates whether there is sustainability in firms’ operational structure and the effects of sustainable development on operational performance and market reaction. We measure the operational structure change of firms as three proxies: (1) the rate of increase in the number of operating segments, (2) the Berry–Herfindahl index using the ratio of sales of each operating segment out of total sales, and (3) the size of net investment in plant and equipment. Our results show that operational structure change has a statistically significant and positive correlation with long-term operating performance. In addition, there is no significant stock price response at first, but the operating performance in the next term is perceived as a favorable factor after three years. The results show that there are different responses in the stock market toward operational structure change. The empirical results confirm that firms with SEO have sustainable development in operational structure and that markets recognize firms’ sustainability strategy arising from SEOs.

Keywords: seasoned equity offerings; sustainable development; cumulative abnormal return; operational structure change (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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