TY - JOUR
T1 - First-move advantage in seasoned equity offerings: Evidence from European banks
AU - Botta, Marco
PY - 2019
Y1 - 2019
N2 - The financial crisis that started in 2008 has generated significant losses for European banks, forcing them to undertake a series of seasoned equity offerings (SEOs) to reinforce their balance sheets in order to comply with regulatory capital requirements. As a result, they have produced repeated SEO waves in a relatively short time frame, when capital supply was limited due to the economic and financial context. We investigate the conditions at which European banks have been able to raise new equity capital by means of rights issues during the global financial crisis, demonstrating the existence of a first-move advantage: within a SEO wave, banks that acted first were able to complete the capital increase at more favorable conditions than their peers that acted later. We also show that first-movers experienced higher valuation ratios at the final cum-rights date compared to late-comers. As a result, first-movers obtained a double advantage: they could offer a lower discount on a price that embedded an higher valuation ratio.
AB - The financial crisis that started in 2008 has generated significant losses for European banks, forcing them to undertake a series of seasoned equity offerings (SEOs) to reinforce their balance sheets in order to comply with regulatory capital requirements. As a result, they have produced repeated SEO waves in a relatively short time frame, when capital supply was limited due to the economic and financial context. We investigate the conditions at which European banks have been able to raise new equity capital by means of rights issues during the global financial crisis, demonstrating the existence of a first-move advantage: within a SEO wave, banks that acted first were able to complete the capital increase at more favorable conditions than their peers that acted later. We also show that first-movers experienced higher valuation ratios at the final cum-rights date compared to late-comers. As a result, first-movers obtained a double advantage: they could offer a lower discount on a price that embedded an higher valuation ratio.
KW - Equity issue
KW - First-mover advantage
KW - Global financial crisis
KW - Market timing
KW - Rights issue
KW - Seasoned equity offer
KW - Equity issue
KW - First-mover advantage
KW - Global financial crisis
KW - Market timing
KW - Rights issue
KW - Seasoned equity offer
UR - http://hdl.handle.net/10807/143703
UR - https://www.sciencedirect.com/science/article/pii/s1044028318301182
U2 - 10.1016/j.gfj.2018.10.003
DO - 10.1016/j.gfj.2018.10.003
M3 - Article
SN - 1044-0283
VL - 41
SP - 1
EP - 12
JO - Global Finance Journal
JF - Global Finance Journal
ER -