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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.

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, January.
    • Handle: RePEc:bla:jbfnac:v:34:y:2007:i:1-2:p:33-64
    DOI: 10.1111/j.1468-5957.2006.00653.x
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    Cited by:

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    3. 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.
    4. Iqbal, Abdullah & Akbar, Saeed & Shiwakoti, Radha K., 2013. "The long run performance of UK firms making multiple rights issues," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 156-165.
    5. 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.
    6. Dang, Man & Puwanenthiren, Premkanth & Truong, Cameron & Henry, Darren & Vo, Xuan Vinh, 2022. "Audit quality and seasoned equity offerings methods," International Review of Financial Analysis, Elsevier, vol. 83(C).

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