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Managerial Financial Education and the Valuation Effects of Seasoned Equity Offerings: Evidence from Taiwan

Managerial Financial Education and the Valuation Effects of Seasoned Equity Offerings: Evidence... This paper tests how managerial financial education explains the valuation effects of seasoned equity offerings (SEOs). Using a sample of Taiwanese listed firms during 2007–2018, our results show that investors react more negatively to SEO announcements by firms with more financially educated managers (MFEMs). Such a negative effect is more pronounced for firms with a higher information asymmetry and more earnings management. Further evidence indicates that SEO firms with MFEMs are substantially overvalued and thus experience a significantly long‐run post‐SEO underperformance. MFEMs are also found to reduce their ownership prior to SEOs. Our overall results support the opportunism‐based information advantage hypothesis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Financial Studies Wiley

Managerial Financial Education and the Valuation Effects of Seasoned Equity Offerings: Evidence from Taiwan

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Publisher
Wiley
Copyright
Copyright © 2019 Korean Securities Association
ISSN
2041-9945
eISSN
2041-6156
DOI
10.1111/ajfs.12281
Publisher site
See Article on Publisher Site

Abstract

This paper tests how managerial financial education explains the valuation effects of seasoned equity offerings (SEOs). Using a sample of Taiwanese listed firms during 2007–2018, our results show that investors react more negatively to SEO announcements by firms with more financially educated managers (MFEMs). Such a negative effect is more pronounced for firms with a higher information asymmetry and more earnings management. Further evidence indicates that SEO firms with MFEMs are substantially overvalued and thus experience a significantly long‐run post‐SEO underperformance. MFEMs are also found to reduce their ownership prior to SEOs. Our overall results support the opportunism‐based information advantage hypothesis.

Journal

Asia-Pacific Journal of Financial Studies – Wiley

Published: Dec 1, 2019

Keywords: ; ; ; ;

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