Abstract:

This paper investigates the impact of Chief Executive Officer (CEO) network centrality on seasoned equity offerings (SEOs). We find a positive relationship between CEO network centrality and firms' propensity to conduct SEOs. Regarding the economic mechanism, equity-issuing firms with well-connected CEOs are associated with positive SEO announcement returns but significantly negative long-run post-SEO returns. Furthermore, these firms exhibit overinvestment problems, increased crash risk, and inferior operating performance following SEOs. Overall, the evidence supports the managerial opportunism hypothesis and highlights the “dark side” of CEO centrality, suggesting that highly connected CEOs cater to market timing and exacerbate opportunistic equity issuance.

Please choose your submission type: Full Paper

Primary Track: Corporate Governance

Keywords: Self-Governance and Internal Corporate Governance Mechanisms ;External Corporate Governance Mechanisms ;Boards of Directors and Top Management Teams

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Ms. Bowen Hu