Windows of opportunity and seasoned equity offerings: An empirical study

Figures & data

Table 1. Summary statistics for different variables of 162 SEO firms listed on BSE

	Mean	Variance	Median	Maximum	Minimum
Market capitalisation (Rs. in Millions)	34,792.17	36,33,82,33,907	687.58	17,29,898.43	52.57
EPS	6.6	240.87	3.14	171.24	−1.15
PE	25.48	810.22	19.26	199.65	0.00
PB	2.17	4.40	1.87	20.23	0.00
Issue size (Rs. in Millions)	2,729.48	13,48,04,617.3	179.6	99,672	15.00

Table 2. Underpricing of 162 firms listed on BSE that issued SEOs from years 1992 to 2012

Type of Return	Close-to-Offer Measure	Close-to-Offer Measure^1	Offer-to-Close Measure
Raw Return (%)	−23.34* ^(−4.10)	−29.30* ^(−16.47)	74.54* ^(5.56)
BSE 100-Adjusted Return (%)	−26.29* ^(−4.89)	−30.09* ^(−15.74)	74.57* ^(5.56)

Note: 1. * Significant at 1% level.

2. Parametric t-test values are shown in parenthesis.

3. ¹When computed excluding 13 SEOs for whom day before SEO opening has been more than one calendar month due to non-availability of data from Prowess.

4. Study finds similar results of market-adjusted returns using BSE Sensex index also.

Table 3. Frequency distribution of SEOs according to offer-to-close underpricing

Class	Offer-to-Close Underpricing (%)	Number of SEOs
<30% Underpricing	9.06 ^(3.54)	55
≥30% <50%	39.18 ^(47.33)	36
≥50% <100%	69.21 ^(34.07)	45
≥100% <200%	148.79 ^(21.92)	21
≥200% <500%	310.94 ^(6.64)	03
≥500% <1000%	-	-
≥1000%	1500.01 ^(30.21)	02
Total SEOs		162

Table 4. AARs, CAARs, Z-Values for the 61-days event window surrounding SEO issue opening along with confidence band at 95% for the CAARs for 114 SEOs

Day	AAR	Z-statistic	CAAR	Z-statistic	Upper Band Values	Lower Band Values	Day	AAR	Z-statistic	CAAR	Z-statistic	Upper Band Values	Lower Band Values
−30	0.009	1.698	0.009	1.698	0.037	−0.019	1	−0.026	−5.997	−0.026	−1.651	−0.021	−0.031
−29	−0.008	−1.276	0.001	0.298	0.020	−0.019	2	−0.008	−1.564	−0.034	−1.898	−0.029	−0.039
−28	0.014	2.317	0.015	1.581	0.031	−0.002	3	−0.009	−1.694	−0.043	−2.16	−0.038	−0.048
−27	0.006	0.631	0.021	1.685	0.034	0.006	4	−0.007	−1.071	−0.05	−2.31	−0.046	−0.055
−26	0.004	0.852	0.025	1.888	0.037	0.011	5	−0.018	−1.016	−0.068	−2.447	−0.064	−0.073
−25	0.008	1.943	0.033	2.517	0.043	0.020	6	−0.012	−1.439	−0.08	−2.65	−0.076	−0.085
−24	−0.002	−0.536	0.031	2.127	0.040	0.019	7	0.002	−0.316	−0.078	−2.666	−0.073	−0.082
−23	0.008	0.833	0.039	2.284	0.048	0.028	8	−0.013	−3.754	−0.091	−3.233	−0.086	−0.095
−22	−0.009	−2.207	0.03	1.418	0.038	0.019	9	−0.015	−2.884	−0.106	−3.649	−0.102	−0.111
−21	0.007	1.004	0.037	1.663	0.045	0.027	10	−0.01	−3.212	−0.116	−4.105	−0.112	−0.121
−20	−0.005	−1.185	0.032	1.228	0.039	0.022	11	0.002	0.645	−0.114	−3.957	−0.110	−0.119
−19	−0.001	−0.226	0.031	1.111	0.038	0.022	12	−0.014	−3.179	−0.128	−4.395	−0.124	−0.133
−18	0.006	1.226	0.037	1.407	0.044	0.028	13	−0.014	−3.035	−0.142	−4.803	−0.138	−0.147
−17	0.004	0.488	0.041	1.487	0.048	0.033	14	−0.014	−3.028	−0.156	−5.2	−0.152	−0.161
−16	−0.01	−1.512	0.031	1.046	0.037	0.023	15	−0.004	−1.199	−0.16	−5.32	−0.157	−0.165
−15	0.008	0.934	0.039	1.246	0.045	0.031	16	0.001	−0.143	−0.159	−5.284	−0.156	−0.164
−14	−0.008	−1.861	0.031	0.757	0.037	0.023	17	0.003	0.396	−0.156	−5.172	−0.153	−0.161
−13	0.012	1.811	0.043	1.163	0.048	0.035	18	−0.008	−2.045	−0.164	−5.411	−0.160	−0.168
−12	−0.008	−1.64	0.035	0.756	0.041	0.028	19	−0.011	−2.141	−0.175	−5.659	−0.172	−0.179
−11	0.001	−0.672	0.036	0.586	0.041	0.028	20	−0.01	−2.429	−0.185	−5.944	−0.181	−0.189
−10	−0.011	−1.74	0.025	0.192	0.030	0.018	21	−0.012	−2.577	−0.197	−6.244	−0.194	−0.201
−9	0.005	0.902	0.03	0.38	0.035	0.023	22	0.003	−0.358	−0.194	−6.234	−0.191	−0.199
−8	0.008	1.5	0.038	0.685	0.043	0.032	23	−0.008	−1.622	−0.202	−6.396	−0.199	−0.207
−7	−0.009	−2.036	0.029	0.255	0.034	0.023	24	0.005	0.863	−0.197	−6.221	−0.194	−0.201
−6	−0.007	−1.31	0.022	−0.013	0.027	0.015	25	−0.013	−1.833	−0.21	−6.411	−0.207	−0.214
−5	−0.009	−2.655	0.013	−0.533	0.018	0.007	26	−0.005	−1.194	−0.215	−6.512	−0.211	−0.219
−4	−0.012	−2.462	0.001	−0.997	0.005	−0.005	27	−0.002	−1.124	−0.217	−6.604	−0.214	−0.221
−3	−0.005	−1.014	−0.004	−1.17	0.001	−0.010	28	−0.008	−1.625	−0.225	−6.759	−0.222	−0.229
−2	−0.006	−1.496	−0.01	−1.428	−0.006	−0.016	29	−0.015	−3.198	−0.24	−7.115	−0.237	−0.244
−1	−0.001	−1.396	−0.011	−1.659	−0.007	−0.017	30	0.01	1.417	−0.23	−6.875	−0.227	−0.234
0	0.011	5.745	0	−0.6	0.004	−0.006

Note: Table value of Z at 95% and 99% level of confidence are 1.96 and 2.58, respectively. If the actual Z values are greater than these values, they are taken to be significant. If the Z values are negative, the rejection region is to be taken to be left of these values, i.e. the actual values of Z lower than the table values are to be taken as significant.

Figure 1. AARs, CAARs, Upper and Lower confidence band (CB) Values for CAARs during the 61-days event window surrounding SEO issue opening for 114 SEOs.

Table 5. CAARs and Z-values for different event windows surrounding SEO issue opening, pre-event, event-day, and post-event windows

Event Window	CAAR	Z-Value
−1 to 1	−0.0152	−0.9514
−3 to 3	−0.0432	−2.8027
−5 to 5	−0.0895	−4.4078
−10 to 10	−0.1512	−6.3084
−15 to 15	−0.1908	−7.2084
−30 to 30	−0.2303	−6.8752
−30 to −1	−0.0119	−1.6588
0	0.0112	5.7451
1 to 30	−0.2296	−9.1938