Preprint Article Version 2 This version is not peer-reviewed

The Effects of Operational Structure Change on Performance after Seasoned Equity Offerings

Version 1 : Received: 9 December 2017 / Approved: 9 December 2017 / Online: 9 December 2017 (13:39:23 CET)
Version 2 : Received: 17 December 2017 / Approved: 18 December 2017 / Online: 18 December 2017 (10:51:56 CET)

A peer-reviewed article of this Preprint also exists.

Ahn, C.; Kim, M.-O.; Jung, H.-R. The Effects of Operational Structure Change on Performance after Seasoned Equity Offerings. Sustainability 2018, 10, 88. Ahn, C.; Kim, M.-O.; Jung, H.-R. The Effects of Operational Structure Change on Performance after Seasoned Equity Offerings. Sustainability 2018, 10, 88.

Journal reference: Sustainability 2018, 10, 88
DOI: 10.3390/su10010088

Abstract

Sustainability is directly linked to firms’ survival in competitive markets. To survive, firms need extra capital, and seasoned equity offerings (SEOs) are one sustainability strategy. Additional resources from SEOs leads to changes in firms’ operational structure, which brings future sustainability. This study investigates whether there is sustainability in firms’ operational structure and the effects of sustainable development on operational performance and market reaction. We measure the operational structure change of firms as three proxies: 1) the rate of increase in the number of operating segments, 2) the Berry–Herfindahl index using the ratio of sales of each operating segment out of total sales, and 3) the size of net investment in plant and equipment. Our results show that operational structure change has a statistically significant and positive correlation with long-term operating performance. In addition, there is no significant stock price response at first, but the operating performance in the next term is perceived as a favorable factor after 3 years. The results show that there are different responses in the stock market toward operational structure change. The empirical results confirm that firms with SEO have sustainable development in operational structure and that markets recognize firms’ sustainability strategy arising from SEOs.

Subject Areas

seasoned equity offerings; sustainable development; cumulative abnormal return; operational structure change

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