Corporate diversification and seasoned equity offering performance

Cathy Xuying Cao, Chongyang Chen (), Ekaterina E. Emm and Bo Han
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Cathy Xuying Cao: Seattle University
Chongyang Chen: Pacific Lutheran University
Ekaterina E. Emm: Seattle University
Bo Han: Seattle University

Review of Quantitative Finance and Accounting, 2022, vol. 58, issue 2, No 5, 614 pages

Abstract: Abstract We document that diversified firms experience less negative seasoned equity offering (SEO) announcement returns than focused firms. The relatively better SEO announcement stock performance of diversified firms is more pronounced among issuers with operations across unrelated industries. Furthermore, following the SEO announcement, diversified firms’ stock returns exhibit post-announcement drift, suggesting a delay in information assimilation. Our findings support the information complexity hypothesis that a more sophisticated organizational form leads to a higher degree of complexity in information processing by investors, which in turn causes a delay in the impounding of information into stock prices.

Keywords: Corporate diversification; Information complexity; Seasoned equity offerings (search for similar items in EconPapers)
JEL-codes: D82 D83 G11 G12 G14 G32 L22 L25 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11156-021-01003-1

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