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The Price Effects of Rights Offerings

Author

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  • White, R. W.
  • Lusztig, P. A.

Abstract

In the theoretical literature of finance, it has been assumed for some time that capital markets are efficient, with security prices reflecting all available information [10]. One purpose of this paper is to consider market efficiency in the context of rights offerings. It has recently been suggested, for example, that rights offerings afford positive abnormal returns [17,18]. This view was immediately countered by the comment that the number of rights issued, and inversely the issue price, cannot affect the market value of the total exrights equity market [21, p. 44]. No empirical evidence was offered on either side, however.

Suggested Citation

  • 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.
    • Handle: RePEc:cup:jfinqa:v:15:y:1980:i:01:p:25-40_00
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    Citations

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    Cited by:

    1. Slovin, M. B. & Sushka, M. E. & Lai, K. W. L., 2000. "Alternative flotation methods, adverse selection, and ownership structure: evidence from seasoned equity issuance in the U.K," Journal of Financial Economics, Elsevier, vol. 57(2), pages 157-190, August.
    2. Adaoglu, Cahit, 2006. "Market reaction to "unsweetened" and "sweetened" rights offerings in an emerging European stock market," Journal of Multinational Financial Management, Elsevier, vol. 16(3), pages 249-268, July.
    3. Muhtaseb, Majed R. & Philippatos, George C., 1995. "Shareholder wealth effects of common stock offerings," Global Finance Journal, Elsevier, vol. 6(2), pages 175-193.
    4. Balachandran, Balasingham & Faff, Robert & Jong, Len, 2005. "Announcements of bonus share options: Signalling of the quality of firms," Global Finance Journal, Elsevier, vol. 16(2), pages 180-190, December.
    5. Marsden, Alastair, 2000. "Shareholder wealth effects of rights issues: Evidence from the New Zealand capital market," Pacific-Basin Finance Journal, Elsevier, vol. 8(3-4), pages 419-442, July.
    6. 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.
    7. 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.
    8. 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.
    9. Carow, Kenneth A. & Cox, Steven R. & Roden, Dianne M., 2009. "Demutualization: Determinants and consequences of the mutual holding company choice," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1454-1463, August.
    10. Richard Kolodny & Diane Rizzuto Suhler, 1985. "Changes In Capital Structure, New Equity Issues, And Scale Effects," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(2), pages 127-136, June.

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