The impact of regulation on information quality and performance around seasoned equity offerings: International evidence

We examine the impact of the enactment of the Market Abuse Directive (MAD) and the Prospectus Directive (PD) across 18 EU countries on seasoned equity offerings (SEOs). Using a difference-in-differences methodology, we document a significant reduction in earnings management, improved post-SEO stock return performance, and a decline in the adverse reaction to SEO announcements following the enactment of MAD. We find similar, albeit weaker, results post-PD. The impact is stronger in countries with high ex-ante institutional quality. Our results suggest that the enactment of these directives leads to improvements in information quality, which reduces information asymmetry around SEOs. (C) 2017 Elsevier B.V. All rights reserved.