Market reaction to “unsweetened” and “sweetened” rights offerings in an emerging European stock market |
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| Institution: | 1. Economics and Finance, School of Business, University of Western Sydney, Australia;2. Chinese Academy of Social Science, China;1. Accounting and Finance, Adam Smith Business School, University of Glasgow, Glasgow G12 8QQ, United Kingdom;2. Department of Finance, National Sun Yat-sen University, No. 70 Lienhai Rd., Kaohsiung 80424, Taiwan;3. Department of Business Administration, Universidad Carlos III de Madrid, Calle Madrid 126, 28903 Getafe, Madrid, Spain;1. Queens University Management School, 185 Stranmillis Road, Belfast BT9 5EE, UK;2. School of Management, The University of Bradford, Emm Ln, Bradford BD9 4JL, UK;1. Department of Economics, Nagoya University, Japan;2. School of Management, Swansea University, United Kingdom |
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| Abstract: | This research investigates the market reaction to both “unsweetened” (plain) and “sweetened” (with simultaneous distribution of bonus issues) rights offerings in the Istanbul Stock Exchange. Consistent with previous U.K. and U.S. evidence, although with larger magnitude, the announcement day abnormal returns for “unsweetened” rights offerings are negative and significant, suggesting that such issues convey unfavorable information about the future operating performance, investment opportunities, liquidity and dividend policy. In contrast, for “sweetened” rights offerings, the abnormal returns are positive. The empirical results do not provide evidence for the enhanced trading liquidity effect (the “sweetener” split effect) and for the overvaluation signaling effect. |
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