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Can the stock market anticipate future operating performance? Evidence from equity rights issues

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  • Kabir, Rezaul
  • Roosenboom, Peter

Abstract

This paper examines whether the stock market valuation impact of rights issues is consistent with subsequent operating performance of issuing firms. Analysing a sample of rights issues in the Netherlands, we find that a significant stock price decline takes place with the announcement of rights issues. We then analyse post-rights issue operating performance and find that, consistent with the decline in stock price during the announcement period, issuing firms also exhibit a significant decline in their operating performance. Our analysis thus demonstrates that the stock market can successfully anticipate future changes in operating performance of firms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 9 (2003)
Issue (Month): 1 (January)
Pages: 93-113

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Handle: RePEc:eee:corfin:v:9:y:2003:i:1:p:93-113

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Web page: http://www.elsevier.com/locate/jcorpfin

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Cited by:
  1. Andrikopoulos, Panagiotis, 2009. "Seasoned equity offerings, operating performance and overconfidence: Evidence from the UK," Journal of Economics and Business, Elsevier, vol. 61(3), pages 189-215.
  2. Kabir, Rezaul, 2003. "Corporate Financing in The Netherlands: Some Empirical Evidence," EIFC - Technology and Finance Working Papers 32, United Nations University, Institute for New Technologies.

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