Negative announcement effects for Seasoned Equity Offerings and institutional reforms in the Japanese market

Research output: Contribution to journalArticle

Abstract

Announcement effects of Seasoned Equity Offerings (SEOs) are a concern of researchers in empirical finance. In the US market many papers report a strong price decline after SEO announcements. Contrary to the US market, a slight price run up after SEO announcements has been reported in the Tokyo market, but these results have a limitation on the number of sample. In this paper we study the announcement effect of SEO firms listed on the 1st section of the Tokyo Stock Exchange based on more than one thousand SEO events. In contrast to the conventional researches, we found negative announcement effects similar to the US market after 2000. Motivated by these results, we conjecture that the Japanese institutional reforms in 2001 caused these negative announcement effects. We think the institutional regulations used to distort the price distribution. We analyze the effect by the option pricing model.

Original languageEnglish
Pages (from-to)191-202
Number of pages12
JournalJournal of Japan Industrial Management Association
Volume61
Issue number3
Publication statusPublished - 2010

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Equity
Finance
Costs
Option Pricing
Market
Seasoned equity offerings
Institutional reform
Announcement effect
Announcement

Keywords

  • Announcement effect
  • Equity finance
  • Seasoned Equity Offerings
  • Stock issue regulation

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Applied Mathematics
  • Management Science and Operations Research
  • Strategy and Management

Cite this

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title = "Negative announcement effects for Seasoned Equity Offerings and institutional reforms in the Japanese market",
abstract = "Announcement effects of Seasoned Equity Offerings (SEOs) are a concern of researchers in empirical finance. In the US market many papers report a strong price decline after SEO announcements. Contrary to the US market, a slight price run up after SEO announcements has been reported in the Tokyo market, but these results have a limitation on the number of sample. In this paper we study the announcement effect of SEO firms listed on the 1st section of the Tokyo Stock Exchange based on more than one thousand SEO events. In contrast to the conventional researches, we found negative announcement effects similar to the US market after 2000. Motivated by these results, we conjecture that the Japanese institutional reforms in 2001 caused these negative announcement effects. We think the institutional regulations used to distort the price distribution. We analyze the effect by the option pricing model.",
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