IPOs and SEOs, real investments, and market timing: Emerging market evidence

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dc.contributor.authorWadhwa, Kavita
dc.contributor.authorNagi Reddy, V.
dc.contributor.authorGoyal, Abhinav
dc.contributor.authorMohamed, Abdulkadir
dc.date.accessioned2020-01-22T14:57:55Z
dc.date.available2020-01-22T14:57:55Z
dc.date.issued2016-05-30
dc.date.updated2020-01-22T14:40:35Z
dc.description.abstractThis study uses market-to-book ratio decomposition to examine whether firms that issue equity through initial public offerings or seasoned equity offerings exploit mispricing because of investor enthusiasm or to finance growth opportunities. We find strong evidence that, on average, firms do not issue mispriced stocks to exploit investors but, rather, to finance their investment opportunities in the form of real assets, inventory, and capital expenses. Firms that issue overvalued stocks with the view to increase their cash holdings experience poor long-run performance. Overall, our results show that stock mispricing drives equity offerings through IPOs and SEOs. Nonetheless, high transparency and balanced regulation in the marketplace deter issuing firms from investing their proceeds in non-value-creating activities. This evidence is robust to alternative measures of valuation and long-run performance.en
dc.description.statusPeer revieweden
dc.description.versionAccepted Versionen
dc.format.mimetypeapplication/pdfen
dc.identifier.citationWadhwa, K., Nagi Reddy, V., Goyal, A. and Mohamed, A. (2016) 'IPOs and SEOs, real investments, and market timing: Emerging market evidence', Journal of International Financial Markets, Institutions and Money, 45, pp. 21-41. doi: 10.1016/j.intfin.2016.05.007en
dc.identifier.doi10.1016/j.intfin.2016.05.007en
dc.identifier.endpage41en
dc.identifier.issn1042-4431
dc.identifier.journaltitleJournal of International Financial Markets Institutions & Moneyen
dc.identifier.startpage21en
dc.identifier.urihttps://hdl.handle.net/10468/9557
dc.identifier.volume45en
dc.language.isoenen
dc.publisherElsevieren
dc.relation.urihttp://www.sciencedirect.com/science/article/pii/S1042443116300464
dc.rights© 2016 Elsevier B.V. All rights reserved. This manuscript version is made available under the CC BY-NC-ND 4.0 licence.en
dc.rights.urihttps://creativecommons.org/licenses/by-nc-nd/4.0/en
dc.subjectInvestment fundingen
dc.subjectIPOsen
dc.subjectLong-run performanceen
dc.subjectMarket-timingen
dc.subjectMarket-to-book ratioen
dc.subjectResidual income modelen
dc.subjectSEOsen
dc.titleIPOs and SEOs, real investments, and market timing: Emerging market evidenceen
dc.typeArticle (peer-reviewed)en
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