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Long-Term Performance Following Rights Issues and Open Offers in the UK

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  • Proches Ngatuni
  • John Capstaff
  • Andrew Marshall

Abstract

This study finds evidence of significant long-term underperformance following rights issues made during 1986-95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991-95 show strong positive performance over a 5-year post-issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986-90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991-95, a period when open offers were more commonly used. Copyright 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Proches Ngatuni & John Capstaff & Andrew Marshall, 2007. "Long-Term Performance Following Rights Issues and Open Offers in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1-2), pages 33-64.
  • Handle: RePEc:bla:jbfnac:v:34:y:2007-01:i:1-2:p:33-64
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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. Wai-Ming Fong & Kevin C.K. Lam, 2014. "Rights Offerings and Expropriation by Controlling Shareholders," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(5-6), pages 773-790, June.
    3. Dionysia Dionysiou, 2015. "Choosing Among Alternative Long-Run Event-Study Techniques," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 158-198, February.
    4. Chen, Hsuan-Chi & Shu, Pei-Gi & Chiang, Sue-Jane, 2011. "The choice between bookbuilding and fixed-price offering: Evidence from SEOs in Taiwan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(1), pages 28-48, February.

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