Seasoned equity offerings and corporate governance in Europe. Issue 2 (7th August 2017)

• Record Type: Journal Article
• Authors: Happ, Christian; Schiereck, Dirk
• Is Part Of: Journal of European real estate research. Volume 10:Issue 2(2017)
• Page Start: 170
• Page End: 194
• Publication Date: 2017-08-07
• Subjects: Real estate -- Event study -- Seasoned equity offerings -- Corporate governance -- 4-factor model -- Announcement effects; Real property -- Economic aspects -- Europe -- Periodicals; Commercial real estate -- Europe -- Periodicals; Housing -- Finance -- Periodicals; Housing -- Europe -- Periodicals; 333.5068
• DOI: 10.1108/JERER-05-2016-0019
• Languages: English
• ISSNs: 1753-9269

Abstract

Abstract : Purpose: This paper aims to analyze the effects on shareholder value caused by the announcement of seasoned equity offerings (SEOs) by real estate firms from 12 European countries. Design/methodology/approach: A 4-factor model event study is conducted to assess the impact of SEO announcements on firm value. Additionally, a cross-sectional regression is run to identify factors that aggravate or mitigate the documented announcement effects. Findings: Significant wealth losses of −1 per cent are found on the announcement day of an SEO. However, firms with good corporate governance and a low probability of overinvesting experience less negative announcement effects. Research limitations/implications: The present study considers equity financing. In this context, investors seem to thoroughly assess the implications of capital increases by looking at quality indicators. For firms with good corporate governance, management incentivizing mechanisms and a lower probability of overinvesting, shareholders' trust in the management mitigates the bad signal that the announcement of an SEO usually conveys. Originality/value: The finding of corporate governance as a value enhancing factor in the context of equity offerings, even during periods of financial turmoil, is reassuring to both managers and regulators.