Corporate diversification and seasoned equity offering performance

We document that diversified firms experience less negative seasoned equity offering (SEO) announcement returns than focused firms. The relatively better SEO announcement stock performance of diversified firms is more pronounced among issuers with operations across unrelated industries. Furthermore, following the SEO announcement, diversified firms' stock returns exhibit post-announcement drift, suggesting a delay in information assimilation. Our findings support the information complexity hypothesis that a more sophisticated organizational form leads to a higher degree of complexity in information processing by investors, which in turn causes a delay in the impounding of information into stock prices.