Seasoned equity offerings and customer–supplier relationships
Johnson, William C.
Masulis, Ronald W.
Date of Issue2018
College of Business (Nanyang Business School)
We investigate how seasoned equity offerings (SEOs) by issuers with large customers affect both trading partners’ market values and the relationship's health. We hypothesize that SEOs reveal adverse information about an issuer's major customers and find that issuers and their large customers experience negative returns on SEO announcements. These results are more pronounced when customers have higher levels of information asymmetry and when customer-supplier relationships are particularly important. Large customers of issuers experience larger declines in post-SEO sales, operating performance, and credit ratings than large customers of non-issuers. Also, SEO issuer sales to large customers and relationship duration significantly decline.
Seasoned Equity Offering
Journal of Financial Intermediation
© 2017 Elsevier Inc. All rights reserved. This paper was published in Journal of Financial Intermediation and is made available with permission of Elsevier Inc.