Heterogeneous effects of the SEC's Securities Offering Reform

We examine whether the capital market benefits of the SEC’s Securities Offering Reform (SOR) depend on issuers’ prevailing levels of idiosyncratic stock return volatility (IVOL). SOR is intended to address information problems prior to Seasoned Equity Offerings (SEO) by affording greater discretion over pre-SEO disclosures, thereby mitigating the problem of SEO overpricing. Consistent with the propensity of overpricing increasing with IVOL, we find that the capital market benefits of SOR are greater for high IVOL issuers. Counter to concerns that SOR may also enable issuers to hype their stock prior to the SEO, we find no evidence of such market conditioning following SOR, even among high IVOL issuers.