Seasoned equity issuers’ prospectus filings: How informative is their tone?
Department
Economics, Finance and Quantitative Analysis
Document Type
Article
Publication Date
5-1-2022
Abstract
Seasoned equity issuers file Forms S and 424B with the Securities and Exchange Commission. We find that 424B filings’ weak-modal tone is positively related to offer price discounts and negatively related to offer-day stock returns. Increases in cautionary (weak-modal, uncertain, and negative) tone from the initial to final filing are followed by lower abnormal stock returns. Preliminary evidence indicates that cautionary tone relates positively to litigation risk and increased after the passage of the Sarbanes-Oxley Act. Our findings suggest that the cautionary tone of seasoned equity issuers’ prospectuses has negative information content, which is gradually incorporated into the stock prices.
Journal Title
Financial Review
Journal ISSN
07328516
Volume
57
Issue
2
First Page
369
Last Page
395
Digital Object Identifier (DOI)
10.1111/fire.12296