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Drivers of price reaction to rights issue announcements in the Kuwait Stock Exchange

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  • Alhashel
  • Alojayan

Abstract

This study examines the drivers behind stock price reactions to announcements of rights issues by firms listed on the Kuwaiti Stock Exchange for the period 2003-2013. We find higher cumulative abnormal returns for firms that undertake larger issues, with the issue size reflecting the availability of favourable investment opportunities and their potential positive impact on firms' earnings. We also document a positive price reaction in firms that are affiliated with a family group. We interpret this as evidence that the proceeds of the rights offering would be employed effectively when the firm is controlled by a family firm. No evidence was found for the price pressure and pricing effects.

Suggested Citation

  • Alhashel & Alojayan, 2015. "Drivers of price reaction to rights issue announcements in the Kuwait Stock Exchange," Applied Economics, Taylor & Francis Journals, vol. 47(59), pages 6425-6437, December.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:59:p:6425-6437
    DOI: 10.1080/00036846.2015.1071476
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    References listed on IDEAS

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    1. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    2. International Monetary Fund, 2004. "Philippines: Financial Sector Assessment Program-IOSCO Objectives and Principles of Securities Regulation Assessment," IMF Staff Country Reports 2004/062, International Monetary Fund.
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