Long-term performance of seasoned equity offerings: Benchmark errors and biases in expectations

I investigate the long-term performance of firms that issue seasoned equity relative to a variety of benchmarks. I find that these firms significantly underperform all of my benchmarks over the fl ve years following the equity issues. A cross SEOs, I find similar levels of underperformance for both small firms and large firms, and both growth firms and value firms. The paper also shows that factor-model benchmarks are misspecified Hence inferences on SEO underperformance based on such benchmarks are misleading. I also find that SEOs underperform their benchmarks by twice as much within earnings announcement windows as they do outside these windows.