How do investors underreact to seasoned equity offerings? Evidence from Taiwan's corporate governance evaluation

This study examines whether long-run stock underperformance following seasoned equity offerings (SEOs) differs with a firm's corporate governance practices. We address this issue by using Taiwan's official annual corporate governance evaluation to represent the quality of firm governance. Results show that firms with better governance exhibit positive long-run post-SEO stock performance, whereas those with poor governance continue to be underperforming after SEOs. Our findings reveal that investor’ underreaction to SEOs varies with the levels of corporate governance. •Examine relations between Taiwan's corporate governance evaluation and SEO firms' long-run stock performance.•SEO firms with better governance exhibit positive long-run post-SEO stock performance.•Those with poor governance continue to be underperforming after SEOs.•Investor’ underreaction to SEOs varies with the levels of corporate governance.