Shareholder wealth effects of rights issues: Evidence from the New Zealand capital market |
| |
| Affiliation: | 1. Zhejiang Province Key Laboratory of Quantum Technology and Device, Department of Physics, Zhejiang University, Hangzhou, 310027, China;2. Zhejiang University of Water Resources and Electric Power, Hangzhou, 310018, China;3. School of Science, Westlake University, 18 Shilongshan Road, Hangzhou, 310064, China;4. Department of Physics, Hangzhou Normal University, Hangzhou, 310036, China;1. Coventry Business School, Coventry University, UK;2. Plymouth Business School, University of Plymouth, UK;3. Faculty of Management, Law and Social Sciences, University of Bradford, UK;1. Department of Economics, University of Bradford, UK;2. Department of Economics, Northampton Square City, University of London, UK;1. Organisation for Economic Co-operation and Development, 2, rue André Pascal, 75775 Paris Cedex 16, France;2. European Systemic Risk Board, Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany;1. INCEIF, Lorong Universiti A, 59100, Kuala Lumpur, Malaysia;2. Durham University Business School, Mill Hill Lane, Durham DH1 3LB, UK |
| |
| Abstract: | This study examines security price reaction to the announcement of rights issues by New Zealand firms between 1976 and 1994. Over this period, price reaction to rights issue announcements in New Zealand was significantly negative. The price reaction to the announcement was more negative for underwritten compared to non-underwritten rights issues. The evidence suggests non-underwritten rights issues have higher expected participation in the issue by existing shareholders. The results are broadly consistent with the adverse selection cost arguments of Eckbo and Masulis [Eckbo, B.E., Masulis, R.W., 1992. Adverse selection and the rights offer paradox. Journal of Financial Economics 32, 293–332] and help further explain the rights offer paradox whereby firms in a small capital market, like New Zealand, continue to rely on rights issues to raise new equity. Price reaction to the rights issue announcement was also more negative the larger the relative issue size. This result supports both the adverse selection cost and information asymmetry arguments of Krasker [Krasker, W.S., 1986. Stock price movements in response to stock issues under asymmetric information. Journal of Finance 41, 93–105] and the signaling framework hypothesis of Miller and Rock [Miller, M.H., Rock, K., 1985. Dividend policy under asymmetric information, Journal of Finance 40, 1031–1051]. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
