Ch. 6: Security Offerings 349
Ta b l e 1 9
Monthly abnormal equal-weighted portfolio return (αp) following IPOs, SEOs, and equity private placements
(PPEs), 1980–2000
αp RM SMB HML UMD LMH R^2
A. Sample of 5,128 IPOs by industrial firms
− 0. 16 ( 0. 492 ) 1. 14 ( 0. 000 ) 1. 17 ( 0. 000 ) − 0. 29 ( 0. 006 ) 0.838
0. 25 ( 0. 416 ) 0. 95 ( 0. 000 ) 1. 03 ( 0. 000 ) − 0. 27 ( 0. 020 ) − 0. 19 ( 0. 061 ) − 0. 53 ( 0. 006 ) 0.863
B. Sample of 779 IPOs by banks and financial firms
− 0. 10 ( 0. 695 ) 1. 09 ( 0. 000 ) 0. 75 ( 0. 000 ) 0. 61 ( 0. 000 ) 0.616
0. 03 ( 0. 922 ) 1. 06 ( 0. 000 ) 0. 74 ( 0. 000 ) 0. 60 ( 0. 000 ) − 0. 10 ( 0. 278 ) − 0. 06 ( 0. 726 ) 0.618
C. Sample of 5,127 SEOs by industrial issuers
− 0. 18 ( 0. 167 ) 1. 20 ( 0. 000 ) 0. 92 ( 0. 000 ) − 0. 11 ( 0. 057 ) 0.923
0. 18 ( 0. 125 ) 1. 04 ( 0. 000 ) 0. 80 ( 0. 000 ) − 0. 09 ( 0. 073 ) − 0. 17 ( 0. 000 ) − 0. 45 ( 0. 000 ) 0.949
D. Sample of 878 SEOs by banks and financial firms
− 0. 16 ( 0. 378 ) 1. 12 ( 0. 000 ) 0. 52 ( 0. 000 ) 0. 77 ( 0. 000 ) 0.720
− 0. 09 ( 0. 650 ) 1. 10 ( 0. 000 ) 0. 51 ( 0. 000 ) 0. 77 ( 0. 000 ) − 0. 05 ( 0. 421 ) − 0. 05 ( 0. 650 ) 0.720
E. Sample of 693 SEOs by public utilities
- 06 ( 0. 744 ) 0. 62 ( 0. 000 ) 0. 05 ( 0. 374 ) 0. 65 ( 0. 000 ) 0.458
− 0. 08 ( 0. 644 ) 0. 74 ( 0. 000 ) 0. 15 ( 0. 008 ) 0. 61 ( 0. 000 ) 0. 01 ( 0. 829 ) 0. 34 ( 0. 002 ) 0.481
F. Sample of 506 PPEs by industrial issuers
− 0. 48 ( 0. 066 ) 1. 15 ( 0. 000 ) 1. 14 ( 0. 000 ) − 0. 37 ( 0. 001 ) 0.783
− 0. 04 ( 0. 884 ) 1. 03 ( 0. 000 ) 1. 11 ( 0. 000 ) − 0. 40 ( 0. 000 ) − 0. 32 ( 0. 000 ) − 0. 21 ( 0. 178 ) 0.811
Starting in February 1980, a firm is added to the portfolio in the month following the month of the IPO and
held for five years or until delisting (if sooner). The IPO sampling stops in 12/2000 while the abnormal return
estimation ends in December 2002. Abnormal returns are estimated using the following asset pricing model:
rpt=αp+β 1 RM+β 2 SMBt+β 3 HMLt+β 4 UMD+β 5 LMH+et,whererptis the portfolio excess return, RM is the excess return on the CRSP value weighted market index,
SMB and HML are theFama and French (1993)size and book-to-market factors, UMD is a momentum factor
constructed as the returns difference between the one-third highest and the one-third lowest CRSP performers
over the past 12 months, and LMH is theEckbo and Norli (2005)turnover factor (a portfolio long in low-
turnover stocks and short in high-turnover stocks). The coefficients are estimated using OLS. Standard errors
are computed using the heteroskedasticity consistent estimator ofWhite (1980). The numbers in parentheses
arep-values.R^2 is the adjustedR-squared.
liquidity is a priced risk factor, one cannot reject the null of zero abnormal performance
following debt offerings by U.S. firms.^54
(^54) Brav et al. (2005)examine institutional lender pricing of (private) loans to equity-issuing firms. They report
lower loan yields for equity-issuers relative to non-issuing firms. This is further evidence consistent with the
proposition that the relatively low post-issue equity returns reflect lower risk.