The Effect of Analyst Coverage on the Relationship between Seasoned Equity Offerings and Investment Efficiency From Korea

Hyun Min Oh and Woo Young Kim
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Hyun Min Oh: School of Business, Hanyang University, 222 Wangsimni-ro, Seongdong-gu, Seoul 04763, Korea
Woo Young Kim: College of Social Science, Dongduk Women’s University, 60, Hwarang-ro 13-gil, Seongbuk-gu, Seoul 02748, Korea

Sustainability, 2018, vol. 10, issue 8, 1-21

Abstract: In order for a firm to remain sustainable, it must establish a strategy that is appropriate to its changing environment. One of these strategies is that the procurement of capital and the efficient operation of the procured capital are directly linked to the sustainability of the firm. This study empirically analyzes the relationship between seasoned equity offerings (hereafter SEO) and investment efficiency. We examine the investment efficiency of firms that have SEO and those that do not, and then analyze the effect of analysts on the relationship between SEO and investment efficiency. The empirical results of this study are as follows. First, there is a significant negative correlation between SEO and investment efficiency, meaning that firms with SEO have lower investment efficiency than firms without SEO. Second, the interaction variable between SEO and analyst participation showed a significant positive correlation with investment efficiency, meaning that the more active the analyst, the more any ineffective investment that is derived from managers’ opportunistic earnings management is suppressed. The results show that the efficient operation of procured capital is important for the sustainability of the firm, and that the analyst plays an important role in monitoring the efficient allocation of resources as an external auditor.

Keywords: seasoned equity offerings; sustainable strategy; investment efficiency; analyst coverage; analyst followings (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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