CEO-friendly boards and seasoned equity offerings

This paper investigates the effect of CEO-friendly boards on seasoned equity offerings (SEOs). We provide evidence that CEO-friendly boards have a negative and statistically significant impact on SEO announcement returns. This finding suggests that SEO announcements by firms with CEO-friendly boards signal agency problems and, therefore, investors react negatively to such SEO announcements. We further provide evidence that the negative effect of CEO-friendly boards on SEO announcement returns is weaker in firms with high growth opportunities and high liquidity needs. Finally, we document that CEO-friendly boards are also negatively associated with post-SEO long-term performance.