The authors wish to thank Steve Ferris and an anonymous reviewer of Financial Review, and participants who offered suggestions when an earlier version of the paper was presented at Massey University in New Zealand.
Motivation and Performance of Seasoned Offerings by Closed-End Funds
Article first published online: 9 MAR 2005
Volume 36, Issue 3, pages 101–122, August 2001
How to Cite
Akhigbe, A. and Madura, J. (2001), Motivation and Performance of Seasoned Offerings by Closed-End Funds. Financial Review, 36: 101–122. doi: 10.1111/j.1540-6288.2001.tb00022.x
- Issue published online: 9 MAR 2005
- Article first published online: 9 MAR 2005
- seasoned offerings;
- closed-end funds;
- mutual fund performance
We examine the motivation and performance of closed-end funds that engage in seasoned public or rights offerings. We find that closed-end funds are more motivated to engage in seasoned offerings when their shares exhibit a relatively high premium (compared to their corresponding NAV) and have a high degree of liquidity. We also find a significant negative valuation effect on average in response to seasoned offerings by closed-end funds. Our cross-sectional analysis reveals that the valuation effect at the time of the seasoned offering is more unfavorable for funds that have relatively high expense ratios and are relatively large. Furthermore, we find that the closed-end funds experience significant negative valuation effects over the three-year period subsequent to the seasoned offering, implying poor post-offering performance.