Seasoned Equity Offerings on the Oslo Stock Exchange : An Empirical Study of the Stock Performance Following Seasoned Equity Offerings from 2013 to 2022

Abstract

This thesis explores the short-term impact of seasoned equity offering announcements on the Oslo Stock Exchange from 2013 to 2022. We employ the Carhart four-factor model to analyze the effect on abnormal returns around these announcements. Our approach includes detailed analysis and various visual representations to deepen our understanding of these effects. Additionally, we conduct a cross-sectional analysis to explore the influences on cumulative abnormal return, offering a comprehensive view of the announcement impacts. Our findings reveal statistically significant evidence that SEO announcements generally have a negative impact on the cumulative average abnormal return (CAAR), averaging a decrease of approximately -2.1% in the typical event window. Interestingly, we also observe evidence of positive abnormal returns preceding the announcements. This observation aligns with market timing theory, and suggests that companies benefit from timing their seasoned equity offerings during periods where investor expectations for the future are overly optimistic (Baker and Wurgler, 2002). The cross-sectional analysis, focusing on CAR as the dependent variable, identifies significant factors that explain variations in CAR. Specifically, we find that deal size to market capitalization with dilution as a mitigating effect, significantly influences CAR, while issue discount shows no significant impact. These findings are intriguing as they challenge our original assumptions about these variables. It appears that these variables are influenced in a manner consistent with market timing theories. In conclusion, our study indicates that, on average, SEO announcements lead to a decline in abnormal returns. Certain factors, namely size to market capitalization and dilution, have a substantial explanatory power regarding the extent of CAR’s impact. Furthermore, our analysis suggests that firms tend to time their equity issues strategically to minimize the overall negative effect on their stock prices.