Explanations of cycles in seasoned equity offerings: an examination of the choice between rights issues and private placements

Adrian Melia, Howard Chan, Paul Docherty, Steve Easton

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

Abstract

A feature of the Australian equity market is that, unlike all other equity markets, private placements and rights issues are used more frequently than public offerings. This study examines time-variation in these types of seasoned equity offerings (SEOs), to examine choice between them, and to enhance our understanding of the reasons for time-variation in SEOs. Time-variation in information asymmetry, the demand for capital, and investment sentiment, together with market timing, are explanations for this cyclicality in SEO issuance; although the drivers of time-variation differ across SEO types. Time-variation in the demand for capital has a statistically and economically significant impact on time-variation in private placements, while time-variation in investor sentiment has a statistically and economically significant impact on the prevalence of rights issues. Market timing and information asymmetry do not have explanatory power for variation in SEO activity.

Original languageEnglish
Pages (from-to)16-25
Number of pages10
JournalPacific Basin Finance Journal
Volume50
DOIs
Publication statusPublished - Sep 2018

Keywords

  • Demand for capital
  • Information asymmetry
  • Investor sentiment
  • Market timing
  • Private placement
  • Rights issue
  • SEO

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