Three Essays on External Financing

  • Excess Proceeds in the Equity Financing Process|#|Peer Issuance Activities and IPO Underperformance|#|Why are Some SEOs not Withdrawn?

  • Author / Creator
    Chong Meng
  • This dissertation consists of three essays in the field of external financing. In Chapter 1, I explore how excess proceeds that arise from the capital-raising process during firms’ IPOs affect firms’ long-term performance. I document that there are often substantial differences between the filing proceeds and actual proceeds in the initial public offering (IPOs). I refer to the deviation between filing proceeds and issuance proceeds as excess proceeds. Using a sample of U.S. IPOs between 1983 and 2017, I further decompose the excess proceeds into 1) market excess proceeds, 2) idiosyncratic excess proceeds and find that the composition of the proceeds affects firms’ real activities after IPOs. This evidence highlights the importance of the issuance process when analyzing cash spending behaviors after issuance. Additionally, I examine the implications of excess proceeds for issuers’ long-term
    stock performance. I find that high-excess-proceeds IPOs underperform low-excess-proceeds IPOs by more than 3.6% per year. This study suggests a possible inefficiency in the allocation of proceeds in the IPO book-building process.
    Chapter 2 examines the impact of subsequent industry follower IPOs on the long-term stock performance of newly public incumbents. This research is motivated by the recent studies showing that industry peers’ IPO decisions exert a negative impact on incumbents’ stock performance. We find that industry-followers’ IPO decisions account for approximately 60% of NPIs’ stock underperformance. Additionally, we show that newly public incumbents with small initial sizes, more growth opportunities, and experience high post-IPO sales and asset growth respond more negatively to industry peers’ entry. These results highlight the impact of industry peers’ financing decisions on newly public
    incumbents’ stock performance.
    Chapter 3 is based on the observation that while SEO withdrawals are rare, many seasoned equity offering (SEO) firms experiencing extremely negative returns over the filing
    period choose to complete their offerings. We refer to these SEOs as sharp-drop (SD) SEOs and document that managers in SD firms rely more on industry-level and market-level
    information than on the idiosyncratic information when making the issue/withdraw decision. Also, we find that the SD firms’ issuance decision is a defense against delisting. Overall, the evidence suggests that the decision to withdraw is not solely driven by idiosyncratic returns.

  • Subjects / Keywords
  • Graduation date
    Fall 2020
  • Type of Item
  • Degree
    Doctor of Philosophy
  • DOI
  • License
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