Do group-affiliated firms time their equity offerings?

Abstract

Using IPO and SEO data from the Indian capital market, we examine whether group-affiliated firms are able to time their equity issuance relative to stand-alone firms. Group-affiliated firms have access to internal capital markets, which, we argue should allow these firms to raise external capital at an opportune time. Using both direct and indirect measures of market timing, the main finding of our paper is that there are significant difference in how group-affiliated and stand-alone firms raise capital through IPOs and SEOs. We find that stand-alone firms raise more capital and time their IPO offerings whereas group-affiliated firms raise more capital and time their SEO offerings. Consistent with the notion of market timing, we find that the long run underperformance is pronounced for stand-alone IPO and group-affiliated SEO offerings.