Market timing of CEOs and foreign investors' reaction

Excess return, cumulative abnormal return, market to book ratios and liquidity risk are applied as proxies for evaluating the chief executive officer’s (CEO) market timing. The result indicates that managers have total succeeded in timing the market for SEO events. Firms implement seasonal equity offering (SEO) issuance after experiencing a strong increase of stock price, and then underwent a significant reversal of stock price. Besides that, CEO will time the market when they realize the liquidity risk of firms drop to the point where institutional investors have low consideration about risks. Foreign investors reacted strongly when the information about the SEO was announced, specifically, they changed their trading behavior from being a net buying to being a net selling or reducing buying. This reaction is especially strong in companies with low market liquidity. And as a result, foreign investors react more quickly to the information of new stock issuance, their stock return will increase sharply after SEO.