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<p>This study investigates how capital structure dynamics following IPOs, particularly a persistent zero-leverage policy, influences seasoned equity offering (SEO) decisions and market reactions. Using IPO firms from 1980 to 2014, we find that firms with a persistent zero leverage policy issue equity sooner but raise smaller amounts. Their first SEOs generate significantly less negative market reactions, especially when internal liquidity is high. Additionally, all-equity firms tend to have greater growth opportunities and are less inclined toward empire building. They are also more likely to be acquired than peers, further contributing to favorable market perceptions. Our results are robust across various event windows and return models and remain consistent after controlling for financial constraints and underwriter reputation. These findings suggest that capital structure dynamics play a key role in shaping investor interpretation of equity financing decisions.</p>

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Capital structure persistency and seasoned equity financing: evidence from zero-leverage and levered firms

  • 期刊论文

  • 发表日期：

    2026年2月18日

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  • Shuangshuang Ji,
  • Xinxin Li

摘要

This study investigates how capital structure dynamics following IPOs, particularly a persistent zero-leverage policy, influences seasoned equity offering (SEO) decisions and market reactions. Using IPO firms from 1980 to 2014, we find that firms with a persistent zero leverage policy issue equity sooner but raise smaller amounts. Their first SEOs generate significantly less negative market reactions, especially when internal liquidity is high. Additionally, all-equity firms tend to have greater growth opportunities and are less inclined toward empire building. They are also more likely to be acquired than peers, further contributing to favorable market perceptions. Our results are robust across various event windows and return models and remain consistent after controlling for financial constraints and underwriter reputation. These findings suggest that capital structure dynamics play a key role in shaping investor interpretation of equity financing decisions.