An empirical analysis of the relationship between the market response of the SEOs and the growth opportunity

After calculating the average abnormal returns near the information releasing date to new equity issues, using a sample of 47 announcements made during the period 2000-2002 by the event study method, this paper found that the stock market response negatively to such news. Evidence shows that the correlation between the abnormal returns and the growth opportunities proxied for by accounting growth are negative before the announcement year of the new equity issues, the correlation between the abnormal returns and the net income growth rate are positive at the year of announcement to new equity issues but are negative at the next year.