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Rights offerings, takeup, renounceability, and underwriting status

  • Balachandran, Balasingham
  • Faff, Robert
  • Theobald, Michael

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.

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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 89 (2008)
Issue (Month): 2 (August)
Pages: 328-346

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Handle: RePEc:eee:jfinec:v:89:y:2008:i:2:p:328-346
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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