Valuation effects of commercial bank securities offerings

Polonchek, John A.; Slovin, Myron B.; Sushka, Marie E.

doi:10.1016/0378-4266(89)90052-6

Cited by 61 publications

(33 citation statements)

References 19 publications

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“…Our paper also extends the work of Polonchek et al (1989), who find that the mean abnormal returns of bank SEO announcements are higher than those of non-bank counterparts. Our paper also contributes to the strand of literature that explores determinants of the announcement effects of bank SEOs.…”

Section: Highlight For Reviewsupporting

confidence: 81%

“…Our paper also extends the work by Polonchek et al (1989), who find that the mean abnormal stock returns of bank SEO announcements are higher than those of non-bank counterparts. The main limitation of Polonchek et al's (1989) The remainder of the paper is structured as follows: Section 2 describes the data and methodology, Section 3 presents our empirical results and Section 4 concludes.…”

supporting

confidence: 84%

“…To highlight the significance of regulation, we further focus on recent events, such as the financial crisis and the passage of the Dodd-Frank Act, to explore their impact on the difference between bank and non-bank SEO announcement stock returns. We find that issuing costs increase during the financial crisis period and decrease when government regulation tightens.Our paper also extends the work of Polonchek et al (1989), who find that the mean abnormal returns of bank SEO announcements are higher than those of non-bank counterparts. Our paper also contributes to the strand of literature that explores determinants of the announcement effects of bank SEOs.…”

supporting

confidence: 81%

“…Polonchek et al (1989) suggest that, unlike non-banks, banks are monitored by both the market and a regulator, and bank capital structure decisions are constrained by regulation. Regulators impose minimum capital ratios and restrictions on the type of securities that qualify for inclusion in these ratios.…”

mentioning

confidence: 99%

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Bank regulation, financial crisis, and the announcement effects of seasoned equity offerings of US commercial banks

Hong

Siganos

et al. 2016

Journal of Financial Stability

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(2016) Bank regulation, financial crisis, and the announcement effects of seasoned equity offerings of US commercial banks. Journal of Financial Stability, 25, pp. 37-46. (doi:10.1016Stability, 25, pp. 37-46. (doi:10. /j.jfs.2016 This is the author's final accepted version.There may be differences between this version and the published version. You are advised to consult the publisher's version if you wish to cite from it.http://eprints.gla.ac.uk/120226/ This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain. Bank Regulation, Financial Crisis, and the Announcement Effects of Seasoned Equity Offerings of US Commercial BanksHui * Corresdonding author Highlight for ReviewThe paper investigates that the cumulative abnormal stock returns around seasonal equity offerings (SEO) announcement for banks vs. nonbanks using a sample of U.S. commercial banks and non-banks between 1982 and 2012. Our find that the SEO announcement effects are significantly higher than those of non-banks, consistent with the hypothesis that bank regulation reduces reduce the likelihood that bank SEOs signal overpriced equity. In addition, the propensity score matching-based difference-in-difference analysis indicates that this difference is reduced during the 2007-09 global financial crisis period and increased after the passage of the Dodd-Frank Act in 2010. Our results have important implications on the impact of bank regulation and financial crisis on bank SEOs.Our study contributes to the literature in several ways. We first contribute to the debate over whether bank regulation could boost investor confidence and reduce firm equity issuing costs. Our results that banks have higher SEO announcement effects confirm Slovin et al.'s (1991) suggestion that banks are frequent equity issuers due to the low issuing costs. Our results also complement Smith's (1986) findings that utility firms, which operate in a highly regulated industry, also experience relatively higher SEO announcement effects than their less regulated counterparts. Our study offers credence to the theory that regulation could influence investors' perception of information asymmetry between investors and firm managers. To highlight the significance of regulation, we further focus on recent events, such as the financial crisis and the passage of the Dodd-Frank Act, to explore their impact on the difference between bank and non-bank SEO announcement stock returns. We find that issuing costs increase during the financial crisis period and decrease when government regulation tightens.Our paper also extends the work of Polonchek et al. (1989), who find that the mean abnormal r...

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Section: Highlight For Reviewsupporting

confidence: 81%

supporting

confidence: 84%

supporting

confidence: 81%

mentioning

confidence: 99%

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Bank regulation, financial crisis, and the announcement effects of seasoned equity offerings of US commercial banks

Hong

Siganos

et al. 2016

Journal of Financial Stability

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“…Grout and Zalewska (2006) report that regulation impacts market risk as proxied by the single-factor model and the Fama and French three-factor model. Poloncheck, Slovin, and Sushka (1989) empirically support that due to stringent bank regulation, banks experience higher announcement returns of equity issues than counterpart non-financials.…”

Section: Literature Reviewmentioning

confidence: 63%

A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?

Liu

Siganos

2016

International Review of Financial Analysis

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a b s t r a c t a r t i c l e i n f o Available online xxxx JEL classification: G21 G14 G18 Keywords: Convertible bond announcement effect Financials RegulationWe focus on the stock price reaction to convertible bond offering made by financial institutions and find that the cumulative abnormal return over the three day interval around convertible bond issuance is 1.41 percentage higher than that for non-financial institutions. This result supports our hypothesis that since financials are heavily regulated, the market is less likely to assume that the issuance of convertible bond by financials signals information that are overvalued. Our results remain robust after controlling for a number of firm-, issue-, and marketspecific characteristics as well as the level of short selling pressure induced by convertible bond arbitrageurs.

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Stock price effects of bank rating announcements: An application to European Union countries

2018

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This paper uses daily stock prices data surrounding credit rating announcement dates to examine abnormal returns of stocks of the European Union banks experiencing debt rating announcements, during the period 2004–2015. The results of the event studies suggest that rating agencies, by issuing downgrades and upgrades, provide relevant information to capital markets. The results also indicate that rating agencies contribute to enhance the transparency and efficiency in capital markets by standardizing information for all investors. The large positive preupgrade returns we observe are consistent with the view that upgrades are of most interest to market investors. There is no significant evidence of abnormal returns on announcements of rating watches.

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Valuation effects of commercial bank securities offerings

Cited by 61 publications

References 19 publications

Bank regulation, financial crisis, and the announcement effects of seasoned equity offerings of US commercial banks

Bank regulation, financial crisis, and the announcement effects of seasoned equity offerings of US commercial banks

A comparison of the stock market reactions of convertible bond offerings between financial and non-financial institutions: Do they differ?

Stock price effects of bank rating announcements: An application to European Union countries

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