We are grateful to an anonymous referee for helpful comments and suggestions. We also thank Kenneth Borokhovich and the seminar participants at Cleveland State University and the University of Missouri–St. Louis for useful comments. All remaining errors are our own.
DISPOSITION EFFECT AND PUBLIC SECONDARY EQUITY OFFERINGS
Article first published online: 5 MAR 2012
© 2012 The Southern Finance Association and the Southwestern Finance Association
Journal of Financial Research
Volume 35, Issue 1, pages 55–77, Spring 2012
How to Cite
Marciukaityte, D. and Szewczyk, S. H. (2012), DISPOSITION EFFECT AND PUBLIC SECONDARY EQUITY OFFERINGS. Journal of Financial Research, 35: 55–77. doi: 10.1111/j.1475-6803.2011.01309.x
- Issue published online: 5 MAR 2012
- Article first published online: 5 MAR 2012
Shareholders selling shares in public pure-secondary equity offerings are affected by the disposition effect and tend to sell past winners. Selling shares in these offerings is associated with significant indirect offer costs. On average, shares are offered at a 5.5% discount from the market price. Moreover, shares of offering firms are about 8% underpriced. Offer discounts and underpricing are positively related to the proxy for the disposition effect. Our findings are consistent with the proposition that the disposition effect increases the supply of winning stocks and depresses their prices.