The impact of regulation on information quality and performance around seasoned equity offerings: International evidence

Larry Fauver, Gilberto Loureiro and Alvaro G. Taboada

Journal of Corporate Finance, 2017, vol. 44, issue C, 73-98

Abstract: We examine the impact of the enactment of the Market Abuse Directive (MAD) and the Prospectus Directive (PD) across 18 EU countries on seasoned equity offerings (SEOs). Using a difference-in-differences methodology, we document a significant reduction in earnings management, improved post-SEO stock return performance, and a decline in the adverse reaction to SEO announcements following the enactment of MAD. We find similar, albeit weaker, results post-PD. The impact is stronger in countries with high ex-ante institutional quality. Our results suggest that the enactment of these directives leads to improvements in information quality, which reduces information asymmetry around SEOs.

Date: 2017
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:44:y:2017:i:c:p:73-98

DOI: 10.1016/j.jcorpfin.2017.03.008

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