Social connection would affect the process of enterprise's policy making and the financing activities, but there are no studies that discuss the influence of social connection on company's policy making of seasoned equity offerings (SEOs). Therefore, this paper explores whether the social connection between the Directors in the SEO company and the senior supervisors in the underwriters would raise the short- and long-term stock performance after SEOs, and whether it would impact on the company's operating performance in the first year after SEOs., including profitability, growth, operating performance and liquidity.
We use Taiwan Economics Journal (TEJ) database to identify firms that conduct the first–time SEOs during 2002 to 2013. The empirical results have shown that as the enterprise's social connection get stronger, the short-term performance of the first–time SEOs will be better. Particularly, with respect to the cumulative abnormal return for 3 months after the first–time SEOs, are significantly positively.From the viewpoint of operating performance, if the firm has strong social connect relationship with the underwriters in the first-time SEOs, after one year, the operating ability raises as the profitability decreases.
