Rosemary L. Walker
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2 publications
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163 downloads
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638 views
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Signaling and proceeds usage for seasoned equity offerings
Investment Management and Financial Innovations Volume 6, 2009 Issue #2
Views: 496 Downloads: 179 TO CITE -
SEO valuation and insider manipulation of R&D
Robert M. Hull , Sungkyu Kwak , Rosemary L. Walker doi: http://dx.doi.org/10.21511/imfi.13(2-2).2016.01Investment Management and Financial Innovations Volume 13, 2016 Issue #2 (cont. 2) pp. 267-278
Views: 942 Downloads: 166 TO CITEWe examine a sample of 674 SEOs from 1999-2010 where reduced R&D spending is significantly associated with the lowering of insider ownership proportions. With this association established, we derive an R&D manipulation variable measuring underinvestment in R&D. We add to the SEO-R&D literature by examining the relation between R&D underinvestment and common stock valuation around SEOs. In contrast to the IPO research, we do not find that underinvestment in R&D leads to greater SEO stock valuations during the offer price setting process. Like the IPO research, we find that underinvestment in R&D leads to lower stock valuations for short-run post-offering tests. In contrast to the long-run IPO results, we find a significant association between R&D manipulation and stock valuation for long-run post-offering tests where underinvestment in R&D is associated with lower stock valuations. We also find the five % owner group for SEOs is important in explaining R&D manipulation and discover that underpricing for SEOs is not related to R&D manipulation. These latter two findings are different from IPOs. In conclusion, SEOs can be quite different from IPOs when examining the association between the insider manipulation of R&D and stock valuation