Proceedings of 3rd Asia-Pacific Business Research Conference
25 - 26 February 2013, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1
Information Transparency and Investors’ Sentiment:
Evidence from Equity Offering
Yi-Mien Lin＊ and Cheng-An Shen＊＊
This paper examines that the relation between information
transparency and investors’ sentiment under controlling for
corporation governance. First, we hypothesize that investors
have higher sentiment and positive reaction when the firms
choose seasoned equity offering financing, and then we
discuss that whether there is a negative correlation between
investors’ sentiment and idiosyncratic risks if the firms choose
seasoned equity offering. Finally, we test that whether there is
a positive correlation between investors’ sentiment and
abnormal returns in the case of seasoned equity offerings
when idiosyncratic risks are controlled. The empirical results
show that there is a positive correlation between seasoned
equity offerings and investors’ sentiment, and a positive
correlation between investors’ sentiment and abnormal returns.
But there is a negative correlation between idiosyncratic risks
and abnormal returns. Therefore, there is a negative
correlation between abnormal returns and the interaction term
of investors’ sentiment and idiosyncratic risks. The seasoned
equity offerings are a positive evaluation to investors’
sentiment and hence abnormal returns are higher. However,
idiosyncratic risks offset such effects. As a result, there is a
negative correlation between abnormal returns and the
interaction term of investors’ sentiment and idiosyncratic risks.
JEL Codes: D83, G34, M41
Keywords: Information transparency, Idiosyncratic risk, Investors’ sentiment,
Abnormal returns
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Department of Accounting, National Chung Hsing University, Taiwan
Ph.D. Candidate, College of Business, Feng Chia University, Taiwan
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