Abstract
This study investigates the presence of temporary price pressure effects around the offer date of SEOs. SEOs experience significant negative abnormal returns immediately prior to the offer date and significant positive abnormal returns immediately following the offer date. Temporary price pressure can explain much of these returns, as evidenced by: (i) pre-offer returns are related to several characteristics associated with price pressure, and (ii) there is an inverse relation between pre- and post-offer returns. Using an instrumental variables approach, I find that a large portion of the pre-offer abnormal returns reverse during the few trading days after the offer.
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