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

Cite this

@article{bc1dff466502475e8046cb4c221a3391,
title = "Explanations of cycles in seasoned equity offerings: an examination of the choice between rights issues and private placements",
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.",
keywords = "Demand for capital, Information asymmetry, Investor sentiment, Market timing, Private placement, Rights issue, SEO",
author = "Adrian Melia and Howard Chan and Paul Docherty and Steve Easton",
year = "2018",
month = "9",
doi = "10.1016/j.pacfin.2018.02.006",
language = "English",
volume = "50",
pages = "16--25",
journal = "Pacific Basin Finance Journal",
issn = "0927-538X",
publisher = "Elsevier",

}

Explanations of cycles in seasoned equity offerings : an examination of the choice between rights issues and private placements. / Melia, Adrian; Chan, Howard; Docherty, Paul; Easton, Steve.

In: Pacific Basin Finance Journal, Vol. 50, 09.2018, p. 16-25.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Explanations of cycles in seasoned equity offerings

T2 - an examination of the choice between rights issues and private placements

AU - Melia, Adrian

AU - Chan, Howard

AU - Docherty, Paul

AU - Easton, Steve

PY - 2018/9

Y1 - 2018/9

N2 - 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.

AB - 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.

KW - Demand for capital

KW - Information asymmetry

KW - Investor sentiment

KW - Market timing

KW - Private placement

KW - Rights issue

KW - SEO

UR - http://www.scopus.com/inward/record.url?scp=85042594254&partnerID=8YFLogxK

U2 - 10.1016/j.pacfin.2018.02.006

DO - 10.1016/j.pacfin.2018.02.006

M3 - Article

VL - 50

SP - 16

EP - 25

JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

SN - 0927-538X

ER -