Do seasoned offerings improve the performance of issuing firms? Evidence from China

Jia Liu, Yuliang Wu, Qing Ye and Dayong Zhang

International Review of Financial Analysis, 2019, vol. 62, issue C, 104-123

Abstract: This study provides new evidence that the performance of issuing firms varies by issue type, based on survival analysis methods. Our non-parametric results show that firms raising capital through rights issues, and notably through cash offers, experience a greater risk of delisting following issuance, as compared to those issuing convertible bonds. Our Cox model analyses demonstrate that plain equity issues, in contrast to convertible issues, are subject to different degrees of regulatory discipline, obligations and incentives in shaping survival trajectory. Further, high ownership concentration, agency issues intrinsic to equity offerings, weak shareholders' protection, and corporate ownership and governance and corporate control development at the time of an offer markedly influence post-issue survival. Plain equity issues, notably cash offers, are strongly linked with the agency costs of free cash flows. A large and truly independent board, allied to a separation of CEO and chairman powers, acts as a primary restraint on managers' self-interested behaviour. Such a cohesive governance mechanism can restrain rent-seeking in the firm's fundraising initiative. These observations hold when we take into account information available before an issue, at the time of an issue, and after an issue, demonstrating the robustness of our findings.

Keywords: Seasoned issues; Agency costs; Corporate ownership; Corporate governance; Firm viability; Survival analysis; Emerging markets (search for similar items in EconPapers)
JEL-codes: C24 D82 G3 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521918305556
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:62:y:2019:i:c:p:104-123

DOI: 10.1016/j.irfa.2018.08.001

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().