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We use excess return, risks, MB ratios, and cumulative abnormal return as proxies to examine the CEO's market timing. The empirical results indicate that CEOs have been exactly in timing the market for Seasonal equity offering (SEO) events. CEOs have more incentives to execute seasonal equity offering when CAR reach peak and market risk drop to the lowest point that investors become less worried about risks. Evidence also shows that institutional investors do not own insider information before SEO but when issuance date appears, they recognize that CEOs are exploiting insider information in order to issue stocks at the highest price. Hence, the institutional investors switch their trading behavior from long positions to short positions to dodge the potential losses inflicted by the CEO's market timing. The fund manager recognizes that CEOs are implementing market timing so they can earn a positive return in the future. In contrast, security dealers and foreign investors do not recognize the CEO's market timing action, so they do not react, resulting in negative returns in the future.
Luu et al. (Fri,) studied this question.