The Effect of Seasoned Equity Offerings on Stock Price Performance of Firms Listed at the Nairobi Securities Exchange

Abstract

This study sought to examine the effect of the announcement of seasoned equity offerings on the price performance of stocks by looking the behavior of stock returns during the window period. The study was descriptive in nature and involved the investigation of share prices of seasoned equity issuing firms both before and after the announcement of the seasoned equity issues. Stock price performance was measured using stock returns. The effect of the announcement on the stock returns was determined by the significance of the difference between the means of stock returns for the two periods: before and after the announcement day. The study involved 10 firms that made a total of 14 seasoned equity offerings during the period 2004 and 2013. It was found that stock returns of seasoned equity issuing firms decrease after the announcement of the seasoned equity issue. However, statistical tests of significance showed that the reduction was not significant. Consistent with earlier studies in the area, it was concluded that stock price performance of seasoned equity issuing firms is poor after the announcement of the issues. This study contributes to the existing literature by providing a comprehensive analysis of the short-run stock price performance for a number of firms listed in the Nairobi Securities Exchange