Corporate Governance, Dividend Status, Ownership Structure, and the Performance of Greek Seasoned Equity Offerings

Abstract

We examine the short-term and long-term share-price behaviour surrounding the announcement of seasoned equity offerings (SEOs) by firms listed on the Athens Stock Exchange. (ASE) The idiosyncrasies of the ASE make for an interesting investigation of SEO announcements in relation to the effect of corporate governance mechanisms, ownership structure, and dividend-paying status. We examine changes in leverage and systematic risk, as well as the long-term share price and operating performance of those firms involved in a SEO. We report significant share-price appreciations on SEO announcement day. We find a share-price rally before the announcement of SEOs and subsequent share-price reversals. Our results suggest that corporate governance structures, dividend status, and ownership concentration enhance the information content of SEOs. Finally, we report evidence that the long-term operating performance and the capital structure of firms announcing a SEO deteriorates for up to two years following the announcement.

Key Words:

• Rights Issues
• Corporate Governance
• Dividend Status
• Ownership Concentration
• Long-Run Performance

JEL classifications:

• G12
• G32
• G14

The authors would like to thank two anonymous referees for their helpful comments and suggestions. Apostolos Dasilas would like to acknowledge financial support from the International Hellenic University. This paper was written within the context of a project entitled “International Hellenic University (Operation--Development)”, which is part of the Operational Programme “Education and Lifelong Learning” of the Ministry of Education, Religious Affairs, Culture and Sports that is funded by the European Commission (European Social Fund) and from national resources.

Notes

1. Such studies include, among others, Armitage (1998), Asquith and Mullins (1986), Booth and Chang (2011), Eckbo and Masulis (1992), Jegadeesh (2000), Lee (1997), Loughran and Ritter (1995, 1997), Masulis and Korwar (1986), Slovin et al. (2000), and Spiess and Affleck-Graves (1995).

2. It has been argued, however, that entering the Eurozone in 2001 was, to a certain degree, the result of political considerations, as well as of creative accounting practices regarding the country’s financial statistics (e.g. Financial Times, 11 and 30 November 2009).

3. IAS/IFRS were finally adopted on 1 January 2005, although early (voluntary) adoption was encouraged.

4. We define independent and non-executive (or outside directors) as those directors who have no implicit or explicit shareholdings, are not included on the payroll of the firm, and have no existing or prior personal relation to the firm (i.e. spouse of the CEO, relatives on the board).

5. Similar to Becker-Blease and Irani (2008) and Bilinski et al. (2012), we included utilities and financial firms in our analysis.

6. We define “closely held” as shares controlled by a small number of shareholders who are either directly affiliated with the company or management, or belong to majority stakeholders.

7. We thank an anonymous reviewer for this comment.

8. The results are available upon request.