MARKET IMPACT OF COVID-19 TO ANNOUNCEMENTS OF CANADIAN EQUITY OFFERINGS

Abstract

ABSTRACT Did COVID-19 period (March 11, 2020 – Nov. 29, 2021) have differential impact on the market reaction of Canadian bought deal seasoned equity offering announcements compared with pre-COVID-19 period (Jan.13, 2012- March 10, 2020)? How did expected determinants of equity offers affect the market reaction in COVID-19 period compared with pre-pandemic period? Using univariate and multivariate analysis, this study shows no significant difference on the market reaction between pre- and COVID-19 periods. On the other hand, results show determinants have more significant effect on market reaction in the COVID-19 period than in the pre-pandemic period, which was mostly insignificant. For example, in COVID-19 period, offers with favorable market effect are those from health care companies, and those which intended uses of funds are capital investments, debt decrease, and exploration or development. Similarly, positive effect occurs for offers audited by the Big 4 accounting firms, and those sold by existing shareholders (not capital raising) among others. Surprisingly, stock market volatility had favorable market effect in the COVID-19 period. This is an unexpected finding since investors usually unwelcome market volatility. Keywords COVID-19, Market Reaction, Seasoned Equity Offerings, Bought Deals.