The purpose of this study was to compare the right offerings and general public offerings in Seasoned Equity Offerings(SEOs) and analyze and test the difference between them. This study also analyzed empirically the influencing factors of short- and long-term outcomes of SEOs and earning management. A total of 1,536 SEOs issued through right offerings or general public offerings for 13 years from Jan. 1st, 2004 to Dec. 31st, 2016 were analyzed and the results are as follows:
First, the announcement effect of SEOs was lower in right offerings than in general public offerings. The stock price flow for one year before announcement showed, in terms of BHAR, positive excess returns in right offerings and negative one in general public offerings, suggesting that the companies with high performance are likely to prefer right offerings to general public offerings.
Second, for the companies listed on the KOSDAQ market through right offerings, the negative effect on the announcement day was alleviated when it was announced that the SEOs amounts would be allocated to employee stock. Furthermore, the actual purchase of the allocated stocks alleviated the negative effect of long-term performance for three years since This is because the actual stock purchase by the employee stock ownership plan (ESOP), an insider, gives the market a positive signal that the company's performance will improve in the future.
Third, the effect of discount rate was greater in general public offering than in right offerings. The discount rate, in right offerings, had no effect on the announcement effect, indicating that the effect of discount rate varies on the method of SEOs though it is an important variable. This is because, the discount rate had significant effect on the stakeholders'wealth in general public offering in which unspecified public participate but no effect on it in right offerings.
Fourth, the effect of announcement day of the final issue price on stock price was positive when it was higher than initial issuance price and negative it was lower. When the announcement day of final issue price, in addition to event day of SEOs, was included in the analysis and comparison for more comprehensive analysis of announcement effect, the announcement effect became worse.
Fifth, the analysis of samples of companies issued SEOs with both offering methods showed similar with and clearer than results of previous ones. In addition, the quarterly direct comparative analysis of the presence of earning management showed that the right offerings were shown to increase the earnings by using discretionary accruals and real earnings management at next quarter of SEOs.
This study compared directly the right offerings and general public offerings in SEOs and has strength in that samples of companies issued SEOs with both offering methods were collected and analyzed. This study also has contributed to this field by using announcement day of final issue price, ESOP, and discount rate to study SEOs.