Wednesday, June 3, 2015 | 2:00pm–3:30pm | Room 335, HSBC Business School Building

Abstract

We find that agency problems become more severe following seasoned equity offerings. We examine publicly-listed Chinese firms over the period 2000 to 2012, which contains exogenous regulatory shocks on the eligibility of SEOs. The data reveal that during the year of SEO and the following year, overinvestments increase, acquisitions yield lower shareholder returns, director and officer compensation increases with lower sensitivity to performance, and tunneling increases. Cross-sectional differences in SEO announcement returns suggest that investors partially anticipate some of the post-SEO changes. The agency costs stemming from SEOs are negatively related to ownership concentration and growth opportunities, but are unrelated to higher percentage of independent directors on the board or to closer monitoring by regulators.