Download or read book Is the Market Surprised by Poor Earnings Realizations Following Seasoned Equity Offerings? written by Atulya Sarin and published by . This book was released on 2009 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the stock price reaction to earnings announcements in the five years following seasoned equity offerings (SEOs). On average, post-SEO earnings announcements are met with a significantly negative abnormal stock price reaction. Although, this negative reaction accounts for a disproportionately large portion of long-run post-SEO abnormal stock returns, on average, abnormal stock price reactions to post-SEO earnings announcements are reliably negative only within the smallest quartile of equity issuers. For small firms, therefore, these findings are broadly consistent with the hypothesis that firms issue equity when the market over-estimates the firm's future earnings performance. For larger equity issuers, however, our findings provide no support for the overoptimism hypothesis.