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Equity rights issues: Signalling vs issue price irrelevance hypothesis

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  • Nickolaos V. Tsangarakis

Abstract

This study examines the relationship between common stock returns and the subscription price level of equity right offerings in Greece during the period 1981–90. the findings show that the associated stock returns are independent of the issue price. This evidence does not support the view that the issue price serves as a signal of the stock's true value.

Suggested Citation

  • Nickolaos V. Tsangarakis, 1996. "Equity rights issues: Signalling vs issue price irrelevance hypothesis," European Financial Management, European Financial Management Association, vol. 2(3), pages 299-310, November.
    • Handle: RePEc:bla:eufman:v:2:y:1996:i:3:p:299-310
    DOI: 10.1111/j.1468-036X.1996.tb00045.x
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    References listed on IDEAS

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    1. Scholes, Myron S, 1972. "The Market for Securities: Substitution versus Price Pressure and the Effects of Information on Share Prices," The Journal of Business, University of Chicago Press, vol. 45(2), pages 179-211, April.
    2. Mikkelson, Wayne H. & Partch, M. Megan, 1986. "Valuation effects of security offerings and the issuance process," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 31-60.
    3. Heinkel, Robert L & Schwartz, Eduardo S, 1986. "Rights versus Underwritten Offerings: An Asymmetric Information Approach," Journal of Finance, American Finance Association, vol. 41(1), pages 1-18, March.
    4. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    5. Eckbo, B. Espen & Masulis, Ronald W., 1992. "Adverse selection and the rights offer paradox," Journal of Financial Economics, Elsevier, vol. 32(3), pages 293-332, December.
    6. J. Russell Nelson, 1965. "Price Effects In Rights Offerings," Journal of Finance, American Finance Association, vol. 20(4), pages 647-650, December.
    7. Marsh, Paul, 1979. "Equity Rights Issues and the Efficiency of the UK Stock Market," Journal of Finance, American Finance Association, vol. 34(4), pages 839-862, September.
    8. Loderer, Claudio & Zimmermann, Heinz, 1988. "Stock offerings in a different institutional setting : The Swiss case, 1973-1983," Journal of Banking & Finance, Elsevier, vol. 12(3), pages 353-378, September.
    9. White, R. W. & Lusztig, P. A., 1980. "The Price Effects of Rights Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(1), pages 25-40, March.
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    Cited by:

    1. Consuelo Riaño Gil & Francisco Javier Ruiz Cabestre & Rafael Santamaría Aquilué, 2004. "Formación de precios de suscripción en el mercado bursátil español: algunas consideraciones," Investigaciones Economicas, Fundación SEPI, vol. 28(1), pages 141-191, January.
    2. Consuelo Riano & Fco. Javier Ruiz & Rafael Santamaria, 2007. "Determinants of the underpricing of new shares during the subscription period: empirical evidence from the Spanish stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 17(7), pages 521-540.
    3. Edirisinghe U. C & Nimal P.D, 2015. "Stock Price Reaction to Announcements of Right Issues and Debenture Issues: Evidence from Colombo Stock Exchange," International Journal of Business and Social Research, LAR Center Press, vol. 5(2), pages 67-76, February.
    4. Edirisinghe U. C & Nimal P.D, 2015. "Stock Price Reaction to Announcements of Right Issues and Debenture Issues: Evidence from Colombo Stock Exchange," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 5(2), pages 67-76, February.

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