Review of Quantitative Finance and Accounting

, Volume 7, Issue 3, pp 221–238

Corporate performance following stock offerings

  • Aigbe Akhigbe
  • Jeff Madura
  • Stephen P. Zera

DOI: 10.1007/BF00245251

Cite this article as:
Akhigbe, A., Madura, J. & Zera, S.P. Rev Quant Finan Acc (1996) 7: 221. doi:10.1007/BF00245251


There is substantial evidence that stock offerings contain a negative signal, based on numerous studies on the immediate market reaction to the announcement. These studies document the market's ex ante view of how the offering will affect the firm. Our objective is to determine whether the adverse signal is accurate by measuring long-term valuation effects following the stock offering. We find a strong negative valuation effect that accumulates to −30.28 percent after 60 months following the stock offering. These long-term effects were more unfavorable for firms that (1) have relatively large stock offerings, (2) have more free cash flow, (3) experienced larger stock price runups before the offering, and (4) had higher market to book value ratios prior to the offering.

Key words

stock offering valuation effects signal 

Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Aigbe Akhigbe
    • 1
  • Jeff Madura
    • 1
  • Stephen P. Zera
    • 2
  1. 1.Department of Finance and Real Estate, College of BusinessFlorida Atlantic UniversityBoca RatonUSA
  2. 2.Center for Service Sector ManagementCalifornia State UniversitySan MarosUSA

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