Rights offerings, takeup, renounceability, and underwriting status

Bala Balachandran, Robert Faff, Michael Francis Theobald

    Research output: Contribution to journalArticleResearchpeer-review

    43 Citations (Scopus)

    Abstract

    Rights offerings in Australia provide valuable choices to the issuer in terms of both underwriting and renounceability. We formulate a set of hypotheses from a quality-signaling perspective, affording an analysis of the key interrelations between quality, underwriting status, renounceability, takeup, and subscription price discount. We analyse rights offerings from two perspectives: market reaction to rights announcements and identification of the factors driving the choice of issue type. Evidence strongly supports the relation between quality signals and issue type. Using a robustly constructed takeup variable, we establish empirical relations between takeup, underwriting status, and renounceability that differ significantly from those previously reported, but which are consistent with the hypotheses developed in this paper.

    Original languageEnglish
    Pages (from-to)328-346
    Number of pages19
    JournalJournal of Financial Economics
    Volume89
    Issue number2
    DOIs
    Publication statusPublished - Aug 2008

    Keywords

    • Ownership concentration
    • Renounceability
    • Rights offerings
    • Takeup
    • Underwriting

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