UNDERPERFORMANCE IN LONG-RUN STOCK RETURNS FOLLOWING SEASONED EQUITY OFFERINGS

We document that firms making seasoned equity offerings during 1975-1989 substantially underperformed a sample of matched firms from the same industry and of similar size that did not issue equity. This underperformance persists even after controlling for trading system, offer size, and the issuing firm's age and book-to-market ratio. It is similar to that previously documented for initial public offerings, suggesting that managers take advantage of overvaluation in both the initial and seasoned equity offering markets.