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Discount, transparency and announcements effects of equity rights offerings: international evidence

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  • Nils-Christian Bobenhausen

    (RWTH Aachen University)

  • Astrid Juliane Salzmann

    (IESEG School of Management, LEM-CNRS UMR 9221)

Abstract

Equity rights offerings and their respective announcement effects have been studied extensively in the literature. Our study expands upon these studies and focuses on those announcement effects and the relation between the discount of an equity rights offering and the announcement effect. Previous theoretical and empirical analyses show that firms can signal their quality via the discount in an equity rights offering and demonstrate a negative relation between the discount and the announcement effect. We argue that this link is only relevant in environments where signalling is possible and necessary. These are financial markets with a particularly low level of capital market transparency, i.e. high information asymmetry. We calculate announcement effects for an international sample of equity rights offerings and show that the negative effect of the discount on announcement effects can only be observed in environments with a low capital market transparency. Hence, our study estimates announcement effects across several different countries and is thus among the first to analyse signalling considerations for equity rights offerings in different transparency environments.

Suggested Citation

  • Nils-Christian Bobenhausen & Astrid Juliane Salzmann, 2021. "Discount, transparency and announcements effects of equity rights offerings: international evidence," Journal of Business Economics, Springer, vol. 91(5), pages 733-758, July.
    • Handle: RePEc:spr:jbecon:v:91:y:2021:i:5:d:10.1007_s11573-020-01023-8
    DOI: 10.1007/s11573-020-01023-8
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    Cited by:

    1. Mo Chen & Kristina Bogner & Joana Becheva & Jens Grossklags, 2023. "On the transparency of the credit reporting system in China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.
    2. Gao, Xuechen & Hsu, Yuan-Teng & Wang, Xuewu (Wesley) & Yuan, Weici, 2022. "The choice of flotation methods: Evidence from Chinese seasoned equity offerings," Journal of International Money and Finance, Elsevier, vol. 129(C).
    3. Wolfgang Breuer & Santiago Ruiz de Vargas, 2021. "Some key developments in international financial management," Journal of Business Economics, Springer, vol. 91(5), pages 595-615, July.

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    More about this item

    Keywords

    Equity rights offering; Transparency; Discount; Event study;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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