Is it cash o'clock?

Abstract: The purpose of this study is to further investigate how market timing and cash need rationale affects stock performance subsequent to a seasoned equity offering and, by doing so, to expand on previous literature on the subject of seasoned equity offerings and stock performance. In this thesis a quantitative approach taken by estimating buy-and-hold abnormal returns subsequent to a seasoned equity offering by the means of an event study. Further, buy-and-hold abnormal return categorized group returns are assessed. Lastly, multiple multivariate regressions are run to assess the effect of different factors on abnormal returns. We analyze long-run abnormal returns subsequent to SEOs primarily in the context of market timing theory and the pecking-order theory. The explanatory power of various other theories on capital structure are also reviewed. The empirical analysis is based upon a sample of 658 offerings, conducted by firms located in the United States. The firms are listed on New York Stock Exchange, Nasdaq, or American Stock Exchange, and the offering was conducted between 1998-2015. We conclude that market timing and, to some extent, cash need rationale affect stock performance following seasoned equity offerings. Firms that time the market and firms under financial distress experience more negative long-run abnormal returns subsequent to seasoned equity offerings. Further, firms with sufficient financial strength experience more negative long-run abnormal returns subsequent to seasoned equity offerings.