Seasoned Equity Offerings and Disclosure Sentiment Effects: Evidence from the U.S.

Abstract

This paper updates the data regarding Seasoned Equity Offering firms (SEOs) long-term performance and finds evidence in line with prior research that they underperform in the longterm. Furthermore, using automated textual analysis on the relevant disclosure filings SEO firms in the United States publish (Form 10-K, Form 8-K and Form 424B), we investigate the relationship between disclosure sentiment variables and long-term return performance. The evidence shows that more frequent use of negative and uncertain words is associated with worse performance. However, no clear implication of the use of disclosure sentiment variables as viable trading predictors can be shown, after controlling for specific conditions and risk.