The Effect of Analyst Reports on Seasoned Equity Offerings: A Textual Analysis Perspective

DOI: 10.5176/2251-1997_AF18.106

Authors: Her-Jiun Sheu, Kuo-Cheng Huang, Chung-Jung Lee

Abstract:

To verify the qualitative information content of analyst coverage around SEO events, this study investigate the effect of analysts’ textual reports on SEO proceeds and offer price discounts in Taiwan market during 2006–2015. Our results suggest that the frequency of textual reports released before SEO issuance be positively associated with SEO proceeds, whereas show a significantly negative effect on SEO discounts. However, there is no remarkable correlation between the textual tone and SEO proceeds, neither the discounts. After identifying the source of textual reports, we further affirm that the textual reports from foreign analyst presents a more favorable effect on SEO proceeds and discounts than local analyst reports. In other words, the market will certainly rely on the incremental qualitative information released by foreign analysts on SEO issuance.

Keywords: Analyst reports; Seasoned equity offerings; Textual analysis