TY - JOUR
T1 - Rights offerings, subscription period, shareholder takeup and liquidity
AU - Balachandran, Balasingham
AU - Faff, Robert
AU - Theobald, Michael
AU - van Zijl, Tony
N1 - Funding Information:
∗Balachandran, [email protected], La Trobe University, Graduate School of Management, Bundoora, Vic 3086, Australia; Faff, [email protected], University of Queensland, Business School, Queensland 4072, Australia; Theobald, [email protected], University of Birmingham, Business School, University House, Edgbaston, Birmingham B15 2TT, UK, and Mifran-the Associates, Warwick; and van Zijl, [email protected], Victoria University of Wellington, School of Accounting and Commercial Law, 23 Lambton Quay, Pipitea Campus, New Zealand. We gratefully acknowledge the helpful comments from Glenn Boyle, Craig Holden (the referee), Paul Malatesta (the editor), Peter Kein Pham, Tom Smith, and participants at the 13th Finsia-Melbourne Centre for Financial Studies Banking and Finance Conference in 2008, Finance and Corporate Governance Conference held in Melbourne in 2010, and Deakin University Seminar in 2010. We also gratefully acknowledge the research assistance provided by Arifur Khan, Eswaran Velayutham, and Berty Vidanapathirana, and the funding provided by an Australian Research Council Discovery grant (DP0664368) and a grant from the Melbourne Centre for Financial Studies.
PY - 2012
Y1 - 2012
N2 - We examine the role of shareholder takeup in rights offerings on the subscription period price reaction and liquidity. Our results indicate that takeup information is reflected in price adjustments over the subscription period and that quality-related information disclosed on the rights announcement date further impacts prices in this period. Higher shareholder takeup improves liquidity. We do find some evidence of inefficiencies in the adjustment process over the subscription period that, in part, is consistent with a model where markets are characterized by overconfident investors and that also articulates with takeup information arriving in the market.
AB - We examine the role of shareholder takeup in rights offerings on the subscription period price reaction and liquidity. Our results indicate that takeup information is reflected in price adjustments over the subscription period and that quality-related information disclosed on the rights announcement date further impacts prices in this period. Higher shareholder takeup improves liquidity. We do find some evidence of inefficiencies in the adjustment process over the subscription period that, in part, is consistent with a model where markets are characterized by overconfident investors and that also articulates with takeup information arriving in the market.
UR - http://www.scopus.com/inward/record.url?scp=84859969879&partnerID=8YFLogxK
U2 - 10.1017/S0022109011000573
DO - 10.1017/S0022109011000573
M3 - Article
AN - SCOPUS:84859969879
SN - 0022-1090
VL - 47
SP - 213
EP - 239
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 1
ER -