Korea Productivity Association
생산성논집, Vol.34 no.4 (2020)
유상증자 기업의 위험과 비유상증자 기업의 위험에 대한 상대적 비교
While the common belief maintains that seasoned equity offerings (SEO) firms are risky, relatively recent theories propose that risk of SEOs is indeed lower (Zhang, 2005; Carlson et al., 2006). Specifically, Zhang (2005) argues that less risky firms carry significantly higher returns in the phases of the economy when the marginal utility of wealth and the price of risk are high. Therefore, if the risk of SEOs is fundamentally lower, they should carry significantly higher returns in the worst states by stock market performance. It is not clear whether the factor betas in the parameterized models are adequate risk measure. Moreover, the factor models are could not complete in and measuring risk. To overcome the bad-model problem of risk measure, this paper uses a nonparametric method that does not require identifying risk factors. Specifically, we follow Kim and Byun (2010) which examines the relative risk of initial public offerings (IPO) firms to analyze the that of seasoned equity offerings (SEO) firms. By doing so, we compare the result of our relative risk of SEOs with that of IPOs. Our sample consists of 3,421 SEOs issued between 2001 and 2009 in Korea. The non-SEO matching 3,421 firms are the ones that are in the same size decile as the SEO firms and are closest in market-to-book decile to the SEO firms. We measure long-run stock returns of SEO and matching firms using two measures, event-time buy-and-hold returns and calendar-time portfolio returns. The empirical results are as follows. Both the event-time buy-and-hold returns and calendar-time portfolio returns for SEOs are significantly lower than those for matching non-SEO firms, which indicates substantial underperformance of SEO firms. The underperformance of SEOs is consistent with prior findings by many scholars in the United States and South Korea. SEO firms actually perform inferior to matching non-SEO firms in the recession periods of the economy, when the states are classified on the basis of overall stock market performance. This lack of significant outperformance in the recession periods of the economy suggests that SEO firms are not fundamentally less risky. This results is consistent with Kim and Byun (2010) which studies IPO cases. In addition, SEO firms invest more than their matching non-SEO counterparts in all phases of the economy. There is clear evidence that SEOs invest as much relative to non-SEOs in the recession periods of the economy as they do in the expansion periods of the economy. Since SEOs as growth firms do not cut more capital investments in the recession periods, SEOs could not have lower risk than non-SEOs. This results is also consistent with Kim and Byun (2010) which studies IPO case. In a word, this paper finds the empirical results that are not correspondent to the more recent theories which contend SEOs are less risky than non-SEOs. The limitations of this paper and the suggestion of future research are presented as follows. The sample period of between 2001 and 2009 to compare the IPO cases of Kim and Byun (2010) are relatively old. We suggest that future research should update research period and compare the results of SEO cases with those of IPO cases. Recent domestic and foreign studies tend to analyze operating performance in addition stock returns subsequent to SEO. Therefore, we also propose that both stock returns and operating performance of SEO could be analyzed using the nonparametric method of this study.