Do Investors Ever Learn from Seasoned Equity Offerings?

Evidence from Recurring SEOs

Michael Gombola Department of Finance Drexel University Philadelphia PA 19104 [email protected]

Amy Ho Department of Finance Drexel University Philadelphia PA 19104

Feng-Ying Liu Department of Finance Rider University 2083 Lawrenceville Road Lawrenceville, NJ 08548 [email protected]

1 Do Investors Ever Learn from Seasoned Equity Offerings?: Evidence from Recurring SEOs

1. Introduction

The documented poor stock price performance and earnings performance following equity issuance presents a puzzle as to why investors are apparently deceived into buying stock on equity offerings despite the documented poor post-offering performance following stock issuance. Loughran and Ritter (1995) estimate that stock prices perform only about half as well as the market during the years following a stock issue. In another study, Loughran and Ritter (1997) document poor earnings performance following equity offerings. Teoh, Welch, and Wong (1998) present evidence that the poor earnings performance, and accompanying poor stock price performance may result from earnings that are managed upwards prior to stock offerings, only to fall back after the offering.

Although investors might not learn form the general evidence of companies offering equity to investors, they should be able to learn from specific evidence from previous equity offerings by the same company. If a company ahs previously offered equity and rewarded buyers with good earnings performance and good stock price performance, then they should have an easier time in selling future stock issues.

Companies with poor earnings performance and stock price performance following an equity offering should have a more difficult time in selling future issues unless investors are unable to learn from previous experience in offerings by the same company. The old saying “Fool me once, shame on you, fool me twice shame on me”, applies to recurring

SEOs. Investors who are fooled into buying overpriced stock on a previous offering should be cautious of purchasing the same stock on any subsequent offering.

2 If investors learn from previous experience with seasoned equity offerings, then the success of a previous equity offering (measured in term of post-offering performance for new purchasers) and the success of subsequent offering should be related. In order to sell a second equity offering to investors, they should not regret participating in a previous offering by the same company. Therefore, we should expect that only those companies who do not sell overpriced stock to investors are able to go back to markets for an additional offering. If investors can learn from the experience of previous offerings then there should be a relation between success of the first offering and the market reaction on announcement of a second offering. If investors fare well with a previous equity offering, then their response to a subsequent offering should be more favorable, or at least less unfavorable. Conversely, it should be very difficult for companies to issue stock after issuance of a grossly overpriced offering.

This study examines the earnings performance of companies around seasoned equity offerings, with earnings performance used to measure the success of an offering to investors. Previous studies have shown that companies issuing SEOs enjoy particularly good earnings performance prior to the offering and that earnings performance drops off sharply after the offering. Teoh, Welch, and Wong (1998) explain this earnings performance as the result of earnings management. Prior to issuing stock, earnings are managed upwards by incorporating all possible accruals into income, accelerating recognition of income. This acceleration borrows earnings from future periods, however.

After the offering earnings fall, or are less than their potential had the acceleration not taken place.

3 Results of this study show that, following the first of two SEOs by the same company, the earnings decline is somewhat smaller than shown in other studies of SEOs.

There is even some evidence of earnings increases for the second and third year following this first SEO. The market reaction to the SEO is negatively related to operating performance for the offering year and positively, but not significantly, related to operating performance for years after the offering.

Examining the relation between operating performance for the first SEO and the market reaction to the second SEO shows a negative relation between the earnings for the year of the previous offering and the market reaction to the following equity offering.

This finding is consistent with the proposition that investors would penalize companies with inflated earnings in prior offerings. Operating performance in years following the offering is positively, but not significantly related to the market reaction for subsequent offering announcements. Companies with better post-offering operating performance have less negative market reaction to subsequent offering announcements.

Although the results for the relation between operating performance associated with a previous offering and the market reaction for a subsequent offering are not particularly strong, they might be influenced by the relative successful operating performance for companies in the sample. It is the lesser degree of overpricing evident for companies that are able to issue subsequent equity offerings that distinguishes these companies. Investors apparently consider operating performance of a previous SEO only marginally when reacting to a subsequent SEO. Apparently their consideration of operating performance of an SEO impacts upon whether the company is able to issue a subsequent SEO.

4 2. Data and Methodology

A. Sample

Since equity offerings are at the bottom of the pecking order of funding sources, multiple seasoned equity offerings during short periods of time should be few. The sample for this study was taken from the Securities Data Corporation Platinum (SDC) database consists of 2,264 public primary seasoned equity offerings made during the period 1981 through 2000. The SEOs retrieved from SDC meet the following selection criteria: (1) All issues are US common stocks; (2) all issues are not right issues, warrants, unit issues and shelf registrations; (3) the issuing companies are not regulated utility (SIC codes 4910 – 4949) and financial institutions (SIC codes 6000-6999). We identify 363 companies issuing 895 SEOs at least twice during 1981 to 2000. By searching Dow

Jones Newswires, we obtain Wall Street Journal (WSJ) announcement dates for 114 recurring SEOs by 53 companies after excluding non-recurring SEO sample.

Meanwhile, the issuing firms must be present on the Center for Research in

Security Prices (CRSP) and COMPUSTAT Research Insight databases. After identifying all primary SEOs in CRSP, there are 109 primary SEOs by 59 companies available on

CRSP daily return database at the time of the issue. The sample becomes smaller and contains 90 primary SEOs by 41 companies after identifying to the COMPUSTAT database. Since the non-recurring SEOs exist in the sample after matching CRSP and

COMPUSTAT databases, we also need to exclude those non-recurring SEOs sample.

Therefore, we obtain the final sample containing 88 recurring SEOs by 41 companies.

Based on the financing pecking order (i.e., firms prefer internal finance; external financing using debt is better than financing by equity), the small sample size of this

5 paper is reasonable since companies usually seldom issue the recurring SEOs. Table 1 presents the frequency of SEOs for the sample companies. During 1981 and 2000, most companies (85%) made two SEOs and few companies (15%) made three SEOs. The mean (median) interval between SEOs is 2.98 years (2.37 years).

B. Estimating Abnormal Returns

To estimate the stock price reaction to SEO announcements, we use the event study technique. We calculate abnormal returns using the market model, with the CRSP equally weighted index as a proxy for the market return. We estimate the coefficients of the market model by ordinary least squares regression using an estimation period that begins 260 trading days before the announcement date and ends 40 trading days before the announcement. To test significance of abnormal returns we use the parametric t-test based on the cross-sectional standard deviation of abnormal stock returns. We also test significance of median abnormal returns using the sign test. Cumulative abnormal returns over the (-1,0) event period are the focus of the examination of abnormal returns. This event period will capture announcements made the day prior to publication in the Wall

Street Journal.

C. Estimating standardized earnings changes

Earnings performance in the period surrounding SEOs is measure with changes in annual earnings, standardized according to the procedure suggested by Dann, Masulis, and Mayers (1991). Use of annual earnings rather than quarterly earnings maintains comparability with earlier studies and allows a larger sample size, and important consideration in this study where sample size is already limited. Standardizing earnings changes facilitates comparison across firms and reduces heteroskedasticity in the cross-

6 sectional data. Three alternative earnings measures are employed: net operating income

(NOI), earnings before interest and taxes (EBIT), and earnings per share (EPS).

Dividing by the market value of common stock scales the standardized EBIT and

NOI. For the EBIT and NOI earnings measures, the standardized earnings changes (SEC) in event year t for SEO number y of firm j is calculated by

E j,y,t E j,y,t1 E j,y,t E j,y,t1 SEC j,y,t  (  ) / p j,y,t1   , (1) n j,y,t n j,y,t1 p j,y,t1  n j,y,t p j,y,t1  n j,y,t1

where the SEO announcement data falls in year 0, E j, y,t is the earnings for event year t

relative to the announcement of firm j’s yth SEO, p j, y is the stock price at the end of the

year before the announcement of firm j’s yth SEO, and n j, y is the year-end number of outstanding shares for the year before the announcement of firm j’s yth. The stock price and the number of outstanding shares are retrieved from the COMPUSTAT database.

EPS is standardized by dividing by stock price per share rather than total market value since the earnings measure is reported on a per-share basis. The standardized EPS measure is the same as the denominator in (1), except that the scaling factor is the stock price instead of the market value.

The relative timing of the SEO and earnings announcements is illustrated with the

timeline in Fig. 1 where SEO j, y indicates the announcement date of firm j’s yth SEO

and E j, y,t indicates firms j’s announcement of earnings for event year t relative to

SEO y.

7 Fig. 1. Timing of SEO and earnings announcements

t = - 2 t = - 1 t = 0 t = +1 t = +2 t = + 3

E j, y,2 E j, y,1 SEOj,y E j, y,0 E j,y,1 E j, y,2 E j, y,3

D. Testing the relation between earnings changes and stock price reaction

1. Tests based on concurrent earnings information

The analysis begins by examining the relation between the abnormal return

associated with an offering announcement and the earnings changes around the

announcement. This relation indicates whether investors can forecast future

earnings changes and incorporate those forecasts into a new stock price that

incorporates the offering announcements information.

1 ln(1 AR )     SEC   j,y  t j,y1,t j,y (2) t0

2. Tests based on earnings performance of previous SEOs

To examine the relation between SEO announcement-period abnormal returns and

SEOs for event years 0 and 1 to the announcing firm’s immediately preceding SEO, the estimation is based on the following regression:

1 ln(1 AR )     SEC   j,y  t j,y1,t j,y (3) t0

8 In estimating Equation (3), independent variables ( SEC j,y1,0 and SEC j,y1,1 ) must be

realized before dependent variable ( AR j,y ) is observed. Both test SEO and prior SEO are from a sample of 88 SEOs by 41 companies that made at least two SEOs during 1981 and 2000. Sample sizes depend on the availability of earnings data for the year of and year following the prior SEO.

3. Results

Table 1 presents the abnormal stock returns for all 88 SEOs in the sample for each of the days from –5 to +5 relative to the announcement date, the cumulative abnormal return over that period and the cumulative abnormal return over the (-1,0) and (0,1) event periods. Results are similar to those reported in other studies of announcement effects of

SEOs. The mean cumulative abnormal return of –2.03% for the (-1,0) event period is statistically significant at the .01 level, as is the median cumulative abnormal return of –

2.48%. Similar to other studies of the abnormal return associated with SEO announcements, the cumulative abnormal return is statistically significant. However, it is slightly smaller than the mean values of –2.5% to 3.0% reported in other studies. The difference in mean abnormal returns could be due to the later time period represented in our study or it could be due to differences in characteristics of firms that engage in multiple equity offerings.

Table 2 presents the two-day (-1,0) abnormal returns for the first, second, and third equity offering during the sample period. The mean and median two-day abnormal return for the first, second, and third offering are all significantly less than zero. Notable is the less negative mean abnormal return for the second SEO than the first. The difference in means is significantly different from zero at the .05 significance level.

9 Despite the difference in means, the median cumulative abnormal return does not differ between the first SEO during the sample period and the next one. The conflict between a difference in means but not in medians could be due to a few large positive reactions in the sample. These large positive “outliers” are not in keeping with the negative stock market reaction typically associated with an equity offering announcement.

The third SEO ahs a market reaction similar to the first in mean and median abnormal return. Due to small sample size (6 observations) the abnormal return is not significantly different from zero.

Table 3 contains mean standardized earnings changes for the years surrounding

SEO announcements for the first, second, and third SEO announcement during the sample period. Panel A shows standardized changes of earnings per share, Panel B shows standardized changes of earnings before interest and taxes and Panel C shows standardized changes of net operating income.

The patterns of earnings changes surrounding the first SEO are very similar for all three earnings measures. During the second year prior to the SEO there is a rather large earnings increase, although the increase is only statistically significant at the .10 level.

Earnings increases appear during the year before the SEO and for the year of the SEO although the increase is statistically significant only for the year of the SEO and for the net operating income measure. The earnings increases stop after the year of the SEO with a small decline in earnings, not statistically significant, for the year immediately following the offering. This decline for the year immediately following the SEO is itself followed by two years of earnings increases. The second year after the offering, the increase is not statistically significant, but for the third year after the offering the increase

10 is statistically significant at the .01 level. This level of significance is shown for all three of the earnings measures.

The results shown in Table 3 for the first equity offering contrast markedly with those shown by Loughran and Ritter (1997) in their larger sample of SEOs. Loughran and

Ritter (1997) find significant declines in operating performance following SEOs, with the decline accelerating after the offering. In contrast, the decline in earnings for companies making repeated equity offerings is short-lived and turns around very quickly.

Remembering that the average length between offerings for our sample is 2.86 years, the third year after the first offering, is, on average the offering year for the next equity offering. The increased earnings is more consistent with years prior to an SEO, which, on average, it is also.

For the second SEO during the sample period, earnings increases are shown only for the year of the offering. The two years prior to the SEO show either very small insignificant decreases or very small insignificant increases, depending upon which earnings measure is chosen. An increase in earnings that is significant at the .05 level is shown for the EPS and EBIT earnings measures. For the NOI measure it is significant only at the .10 level.

The increase in earnings for the year of the offering is consistent with increases during the third year after the first offering since, on average, they are the same year. The earnings performance for the offering year is apparently good and would be consistent with optimism among investors.

After the offering year, there are small and insignificant increases or decreases in earnings. A possible exception might be the large (but insignificant) increases in the

11 EBIT earnings measure for the third year after the second SEO. AN increase in EBIT together with a small decrease in EPS would be consistent with a substitution of equity for debt in the firm’s financial structure. With less interest but more shares outstanding,

EBIT would rise while EPS falls.

Caution must be exercised in interpreting the results for the third offering since the sample size is limited to 6 firms offering three SEOs during the sample period. There is some evidence of earnings increases prior to the offering and some evidence of decreases after the offering. A statistically significant EPS earnings increase for the offering year is notable given the small sample size. The third offering shows behavior hat is more akin to behavior shown by Loughran and Ritter (1997) for their large sample of SEOs: a prior buildup followed by decreases in earnings following the SEO. The behavior shown by earnings changes for the second and third SEO differs from that shown for the first SEO in that there is no evidence of increases following the second a third SEO whereas there is evidence of earnings increases following the first SEO.

The results shown in Table 3 show differences between SEOs that are followed by subsequent SEOs and those that are not. Apparently, if investors are not disappointed by earnings decreases following an SEO, the firm is able to offer additional equity to the market until investors become disenchanted with the post-offering performance.

Table 4 contains results of a regression testing the relation between SEO announcement-period abnormal returns and standardized earnings changes for each of three subsequent years. All offerings, first, second, and third, are included in the sample used to estimate this regression model. It is estimated for each of the three earnings measures with the results for the EPS measure shown in Panel A, the results for the EBIT

12 earnings measure in Panel B, and the results for the NOI earnings measure in Panel C.

The model indicates a negative relation between event-period abnormal returns and standardized earnings changes for the year of offering, but a positive relation for the years following the offering. The negative relation for pre-offering earnings changes is statistically significant at the .05 level for the EBIT and NOI earnings measures. WE interpret this relation as some skepticism by investors regarding the pre-offering earnings increases. The larger the earnings increase, the more the stock price responds negatively to an offering announcement.

For the two years after the offering, there is a positive relation between the stock price reaction and earnings changes. The price reaction is in some sense predictive of future earnings performance, with a lesser negative stock price response for those companies with lesser post-offering earnings declines. The relation, however, is statistically significant only at the .10 level, and only for the second year following the offering.

Table 5 presents results of regression tests based on earnings changes for previous stock offerings. If investors learn from previous offerings, then they will penalize those companies with performance declines following previous offerings. The expected positive relation between earnings changes for the first year after the previous offering and the stock price reaction for the following offering is significant only at the .10 level and only for the EBIT – based measure of earnings. For the EPS measure the relation is positive and insignificant. For the NOI measure it is negative and very close to zero.

The negative relation between earnings changes for the offering year and the market reaction to the subsequent offering is present for all three earnings measures but

13 statistically significant at the .10 level for only the EBIT and NOI earnings measures.

Despite the lower significance levels, coefficient values tend to be higher for the regression results based on earnings performance for previous offerings than for all offerings. Consequently, it appears that investors learn somewhat from prior offerings but the learning does not add significantly to the relation between prior earnings performance and the market reaction to subsequent offerings. Investors react, but not as much as they perhaps should.

4. Summary and Conclusions

14 References

Asquith, Paul and David W. Mullins, Jr., 1986, "Equity Issues and Offering Dilution," Journal of Financial Economics 15 (1/2), 61-89.

Dann, Larry Y., Ronald W. Masulis and David Mayers, 1991, "Repurchase Tender Offers and Earnings Information," Journal of Accounting and Economics 14 (3), 217-251.

Hansen, Robert S., and Claire Crutchley, 1990, “Corporate Earnings and Financing: an Empirical Analysis,” Journal of Business 63, 347-371.

Healy, Paul M., and Krishna G. Palepu, 1990, “Earnings and Risk Changes Surrounding Primary Stock Offers,” Journal of Accounting Research 28, 25-48.

Loughran, Tim and Jay R. Ritter, 1995, "The New Issues Puzzle," Journal of Finance 50 (1), 23-51.

Loughran, Tim and Jay R. Ritter, 1997, "The Operating Performance of Firms Conducting Seasoned Equity Offerings," Journal of Finance 52 (5), 1823-1850.

McLaughlin, Robyn, Assem Safieddine, and Gopala Vasudevan, 1996, “The Operating Performance of Seasoned Equity Issuers: Free Cash Flow and Post-Issue Performance,” Financial Management 25(4), 41-53.

Pilotte, Eugene and Timothy Manuel, 1996, "The Market's Response to Recurring Events: The Case of Stock Splits," Journal of Financial Economics 41 (1), 111-127.

Rangan, Srinivasan, 1997, “Earnings Management and the Performance of Seasoned Equity Offerings,” Journal of Financial Economics 50, 101-122.

Spiess, D. Katherine and John Affleck-Graves, 1995, "Underperformance in Long-Run Stock Returns Following Seasoned Equity Offerings," Journal of Financial Economics 38 (3), 243-267.

Teoh, Siew Hong, Ivo Welch and T. J. Wong, 1998, "Earnings Management and the Underperformance of Seasoned Equity Offerings," Journal of Financial Economics 50 (1), 63-99.

15 Table 1

Abnormal stock returns around SEO announcements for 88 SEOs by 41 Firms that announced at least two SEOs during 1981-2000

Average Median t- Z- Positive: Generalized Day Abnormal Abnormal N Statistics Statistics Negative Sign Z Return Return

1.58* -5 0.20% 0.21% 0.66 88 48:40 1.51* -0.93 -4 -0.22% -0.32% -0.71 88 37:51 -0.84 -0.93 -3 -0.26% -0.28% -0.85 88 39:49 -0.42 -2.10** -2 -0.62% -0.84% -2.01** 88 35:53 -1.27 -5.42*** -1 -1.57% -0.98% -5.10*** 88 22:66 -4.05*** -2.78** 0 -0.46% -0.87% -1.49* 88 31:57 -2.13** * +1 0.04% -0.10% 0.14 88 41:47 0.01 0.16 +2 -0.48% -0.32% -1.56* 88 36:52 -1.06 -2.01** +3 0.05% -0.43% 0.17 88 31:57 -2.13** 0.18 +4 0.10% -0.44% 0.33 88 38:50 -0.63 0.53 +5 0.35% 0.12% 1.13 88 46:42 1.08 1.42*

Median Cumulativ Cumulativ e Average t- Z- Positive: Generalized Days e Abnormal Statistics Statistics Abnormal Negative Sign Z Return Return

(-1, 0) -2.03% -2.48% -4.66*** -5.80*** 26:62 -3.20***

(0, +1) -0.41% -1.03% -0.95 -1.85** 36:52 -1.06

(-5, +5) -2.85% -3.04% -2.79*** -3.11*** 32:56 -1.91** * Significant at the .10 level. ** Significant at the .05 level. *** Significant at the .01 level.

16 Table 2

Two-day abnormal stock return for SEO announcements by SEO number 1 through 3

First SEO Second SEO Third SEO

Cumulative Average -2.33% -1.68% -2.32% Abnormal Return (-1, 0)

Median Cumulative -2.23% -2.60% -2.45% Abnormal Return (-1, 0)

t-Statistics -3.77*** -2.74*** -1.45*

Z-Statistics -4.18*** -3.66*** -1.71**

Sample Size 41 41 6 * Significant at the .10 level. ** Significant at the .05 level. *** Significant at the .01 level.

17 Table 3

Mean standardized earnings changes (SEC) around SEO announcements by 41 firms that announced at least two SEOs during 1981-2000

18 Panel A: SEC based on earnings per share (EPS)

Year SEO Announcements re la 1st 2nd 3rd ti v e P - to V S SEC t-Statistics P -Value N SEC t-Statistics a N SEC t-Statistics P -Value N E l O u e

- 2 15.52 1.35 0.10 13 1.09 0.39 0.35 34 4.46 0.45 0.33 6

-1 9.73 0.94 0.17 26 -1.42 -0.71 0.24 39 0.96 0.26 0.40 6

0 2.59 1.08 0.14 35 5.95 2.22** 0.02 40 13.74 2.16** 0.04 6

+ 1 -1.55 -0.92 0.18 41 1.59 1.13 0.13 37 -4.68 -0.73 0.24 6

+ 2 4.05 1.19 0.12 39 0.47 0.18 0.42 35 -4.69 -1.02 0.18 5

+ 3 4.71 2.62*** 0.00 38 -0.56 -0.22 0.41 32 4.72 0.51 0.31 5

Panel B: SEC based on earnings before interest and taxes (EBIT)

SEO Announcements Event Y 1st 2nd 3rd e ar P to - S V E SEC t-Statistics P -Value N SEC t-Statistics a N SEC t-Statistics P -Value N O l u e

- 2 10.55 1.62* 0.06 13 -0.23 -0.10 0.46 34 -5.90 -0.99 0.18 6

-1 5.55 0.88 0.19 26 1.40 0.67 0.25 39 26.29 1.09 0.16 6

0 4.20 1.48* 0.07 35 3.45 1.99** 0.02 40 -6.79 -0.74 0.24 6

+ 1 -0.63 -0.41 0.34 41 1.63 1.13 0.13 37 -2.14 -0.27 0.40 6

+ 2 3.77 1.36* 0.09 39 4.44 0.93 0.18 35 -0.20 -0.28 0.39 5

+ 3 8.10 2.03** 0.02 38 24.67 0.81 0.21 32 -5.51 -2.13* 0.05 5

19 Panel C: SEC based on net operating income (NOI)

Event SEO Announcements Y e 1st 2nd 3rd a r t P o - V SEC t-Statistics N SEC t-Statistics P -Value N SEC t-Statistics P -Value N S al E u e O

- 2 4.38 0.90 0.19 13 0.10 0.06 0.47 34 -0.98 -0.18 0.43 6

-1 1.40 0.66 0.25 26 0.39 0.26 0.39 39 6.69 1.71* 0.07 6

0 5.06 1.93** 0.03 35 2.45 1.52* 0.06 40 1.69 0.78 0.23 6

+ 1 -1.22 -0.90 0.18 41 1.69 1.27 0.10 37 0.35 0.05 0.48 6

+ 2 5.33 1.52* 0.06 39 0.64 0.32 0.37 34 0.57 0.98 0.19 5

+ 3 3.77 2.94*** 0.00 38 1.54 0.37 0.35 32 -6.79 -1.98* 0.06 5 *Significant at the 0.10 level using a one-tailed test **Significant at the 0.05 level using a one-tailed test *** Significant at the 0.01 level using a one-tailed test

20 Table 4

Regression results testing the relation between SEO announcement-period abnormal returns and standardized earnings changes for three subsequent years

Parameter Panel A: EPS t-Statistics N Estimation P - Value

Intercept -0.01731 -3.66*** 0.0003

SEC0 -0.03319 -1.10 0.1371 73

SEC1 0.06204 1.28 0.1021

SEC2 0.03845 1.48* 0.0724

Parameter Panel B: EBIT t-Statistics P-value N Estimation

Intercept -0.01755 -3.70*** 0.0002

SEC0 -0.06133 -1.72** 0.0446 73

SEC1 0.07128 1.35* 0.0901

SEC2 0.02285 1.06 0.1470

Parameter Panel C: NOI t-Statistics P - Value N Estimation

Intercept -0.01673 -3.48*** 0.0005

SEC0 -0.08008 -1.83** 0.0361 72

SEC1 0.03140 0.50 0.3089

SEC2 0.04928 1.63* 0.0536 *Significant at the 0.10 level using a one-tailed test **Significant at the 0.05 level using a one-tailed test *** Significant at the 0.01 level using a one-tailed test

21 Table 5

Regression results for testing the relation between SEO announcement-period abnormal stock returns for firms that announced at least two SEOs during 1981-2000 and standardized earnings changes for years 0 and 1 relative to the immediately preceding SEO

Parameter Panel A: EPS t-Statistics P - Value N Estimation

Intercept -0.01684 -1.97** 0.0279

SEC0 -0.05632 -1.02 0.1578 41

SEC1 0.04521 0.61 0.2730

Parameter Panel B: EBIT t-Statistics P-value N Estimation

Intercept -0.01494 -1.83** 0.0375

SEC0 -0.07985 -1.59* 0.0604 41

SEC1 0.10815 1.45* 0.0774

Parameter Panel C: NOI t-Statistics P - Value N Estimation

Intercept -0.01483 -1.75** 0.0437

SEC0 -0.09411 -1.48* 0.0742 41

SEC1 -0.00452 -0.05 0.4818 *Significant at the 0.10 level using a one-tailed test **Significant at the 0.05 level using a one-tailed test *** Significant at the 0.01 level using a one-tailed test

22