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The impact of regulation on the seasoned equity offering decision

Author

Listed:
  • Adrian Melia

    (Newcastle Business School, University of Newcastle, Newcastle, NSW, Australia)

  • Paul Docherty

    (Department of Banking and Finance, Monash University, Melbourne, VIC, Australia)

  • Steve Easton

    (Newcastle Business School, University of Newcastle, Newcastle, NSW, Australia)

Abstract

The rarity of rights issues in the United States makes it difficult to examine the choice between alternative seasoned equity offering (SEO) methods in that market. In Australia, however, both rights issues and private placements are prevalent. We therefore use the Australian market to test whether regulation influences a firm’s choice between rights issues and private placements. When a firm decides to issue seasoned equity in Australia, regulation favours private placements if the issue is small or needs to be completed quickly. Consistent with regulations affecting the choice between SEO types, our empirical results provide evidence that firms in Australia are more likely to choose a private placement for small issues or when taking advantage of temporary periods of overvaluation. JEL Classification: G12, G14

Suggested Citation

  • Adrian Melia & Paul Docherty & Steve Easton, 2020. "The impact of regulation on the seasoned equity offering decision," Australian Journal of Management, Australian School of Business, vol. 45(1), pages 94-113, February.
    • Handle: RePEc:sae:ausman:v:45:y:2020:i:1:p:94-113
    DOI: 10.1177/0312896219833724
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    More about this item

    Keywords

    Private placement; regulation; rights issue; SEO;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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