This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to competed and canceled SEOs, but declines afferward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For Canceled sEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in dence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.
* Clarke, [email protected], Georgia Institute of Technology, Dupree College of Management, Atlanta, GA 30332; Kahle, [email protected], University of Pittsburgh, Katz Graduate School of Business, Pittsburgh, PA 15260; Dunbar, [email protected], University of Western Ontario, Richard lvey School of Business, London, Ontario, N6A 3K7, Canada. This work was begun while Clarke and Dunbar were at the Katz Graduate School of Business at the University of Pittsburgh. Research support from the Institute for Industrial Competitiveness at the University of Pittsburgh is gratefully acknowledged. We thank Ken Lehn, D. Scott Lee and H. Nejat Seyhun (the referees), and seminar participants at Case Western Reserve University, the University of Toronto, and the 1999 Eastern Finance Association Meeting in Miami Beach for their comments.