|
The study is based on a sample, consisting of 278firms, of
the announcements of
SEO(seasoned equity offerings) in Taiwan stock market during
the period from Jan. 1996 to
Dec. 1997, to detect whether the current circling system in TW
is not proper. There are two
major SEO underwriting procedures in TW: by offer=for-sales and by circling.
The paper focuses on two types of firms which adapt different SEO underwriting.
By comparing the both firms'' financial characteristics and
stock price responses,
we know if the existing system is fair. The evidence shows that
89% financial ratios (in the
research) of firms, adapting different underwriting procedures,
don''t have statistically
significant positive abnormal returns for both underwriting
procedures and the reaction levels for both
are different. During the circling procedure, circling firms''
stock price response is
significantly negative but is significantly positive for offer-
for- sales firms''. It''s very clear that
the latter firms have the better stock price performance than
the former. During the days of offerings,
circling firms'' stock price response is significant positive
but is not significant negative for
offer-for sales firms''. In the research, we can be sure that
these two SEO underwriting procedures are
significantly different in all of three event days. Since the
different market responses are not associated
with firms'' financial characteristics, we now can be sure that
current circling system exist some problems.
The system may provide some big stockholders having chances to
arbitrage and to get more newissuing shares
then they should have. To the other stockholders who can''t
engage in arbitraging and get new issuing shares,
the existing circling system is unfair.
|