Managerial Financial Education and the Valuation Effects of Seasoned Equity Offerings: Evidence from Taiwan

摘要

This paper tests how managerial financial education explains the valuation effects of seasoned equity offerings (SEOs). Using a sample of Taiwanese listed firms during 2007-2018, our results show that investors react more negatively to SEO announcements by firms with more financially educated managers (MFEMs). Such a negative effect is more pronounced for firms with a higher information asymmetry and more earnings management. Further evidence indicates that SEO firms with MFEMs are substantially overvalued and thus experience a significantly long-run post-SEO underperformance. MFEMs are also found to reduce their ownership prior to SEOs. Our overall results support the opportunism-based information advantage hypothesis.