Heterogeneous effects of the SEC’s Securities Offering Reform

The SEC’s Securities Offering Reform (SOR) was intended to address information problems prior to Seasoned Equity Offerings (SEO), thereby mitigating the problem of SEO overpricing. Consistent with the propensity of overpricing increasing with idiosyncratic stock return volatility (IVOL), we find greater capital market benefits from SOR for high IVOL issuers. Counter to concerns that SOR also enables issuers to hype their stock, we find no evidence of market conditioning following SOR, even among high IVOL issuers. •The Securities Offering Reform (SOR) led to improved stock price efficiency.•The effect amplifies with speculative stock attributes (idiosyncratic volatility).•We find no evidence of market conditioning after SOR.