Abstract
This paper investigates the effect of CEO-friendly boards on seasoned equity offerings (SEOs). We provide evidence that CEO-friendly boards have a negative and statistically significant impact on SEO announcement returns. This finding suggests that SEO announcements by firms with CEO-friendly boards signal agency problems and, therefore, investors react negatively to such SEO announcements. We further provide evidence that the negative effect of CEO-friendly boards on SEO announcement returns is weaker in firms with high growth opportunities and high liquidity needs. Finally, we document that CEO-friendly boards are also negatively associated with post-SEO long-term performance.
| Original language | English |
|---|---|
| Article number | 100761 |
| Journal | Journal of Behavioral and Experimental Finance |
| Volume | 36 |
| DOIs | |
| State | Published - Dec 1 2022 |
Keywords
- Agency theory
- CEO-friendly boards
- Growth opportunities
- Liquidity needs
- Post-SEO long-term returns
- Seasoned equity offerings
- Social capital theory
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