Managers' private information, investor underreaction and long-run SEO performance

Pawel Bilinski, Norman Strong

Research output: Contribution to journalArticlepeer-review


For a sample of 2,879 SEOs by US stocks from 1970 to 2004, this paper decomposes an average three-year post-issue buy-and-hold abnormal return of -25.9% (relative to size- and B/M-matched non-issuing stocks) into two components. One component, representing 41% of the total, is due to lower risk exposure. The second component, representing the remaining 59%, is abnormal performance related to the surprise element of the issue decision, which the paper attributes to managers' private information that the market does not incorporate into the announcement return. This second component results in abnormal returns during the 16 months after the offering. © 2011 John Wiley & Sons Ltd.
Original languageEnglish
Pages (from-to)956-990
Number of pages34
JournalEuropean Financial Management
Issue number5
Publication statusPublished - Nov 2013


  • investor underreaction
  • long-run performance
  • managerial private information
  • seasoned equity issues


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