6-1 (A63)

Idiosyncratic risk and long-run stock performance following

seasoned equity offerings

Po-Hsin Ho

National United University, Taiwan

Chia-Wei Huang

Yuan Ze University, Taiwan

Chih-Yung Lin

National Taichung Institute of Technology, Taiwan

Ju-Fang Yen

National Taiwan University, Taiwan

Post-issue stock underperformance is driven, at least in part, by the contemporary decline in idiosyncratic risk (proxied by idiosyncratic volatility) exposure for seasoned equity offerings (SEO) firms. As young firms dominate the SEO market, they generally face higher uncertainty of mean profitability, which they resolve more quickly due to learning. Hence they experience a larger reduction in idiosyncratic risk than their size, book-to-market, and exchange matching firms suggests. Furthermore, post-issue abnormal change in idiosyncratic risk is positively associated with long-run stock abnormal return, an association driven mainly by young firms that experience significant abnormal declines in idiosyncratic risk.