The Importance of the Sequence in UK Rights Issues

Abstract:  This study examines the market reaction to UK rights issues announcements and also investigates the position of these issues in the sequence in which the firms make multiple rights issues. The sample consists of 569 rights issues made by 243 industrial and financial firms over the period 1988–1998. The results suggest that the UK market responds negatively to earlier issues in the sequence made by multiple rights issuers. This negative reaction diminishes and becomes insignificant at or after the third issue. In addition, the study shows that the favourable response to later rights issues in the sequence is due to the diminishment in the level of information asymmetry around such issues.