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Arbitrage Opportunities and Event Impacts On Spanish Increase Capitals

Author

Listed:
  • Manuel Verdú Henares

    (University of Valencia)

  • Óscar Carchano Alcina

    (University of Valencia)

  • José Emilio Farinós Vinas

    (University of Valencia)

Abstract

In capital increases in which pre-emptive subscription rights are issued, there are two ways of acquiring the company's shares: either by buying them directly on the market, or by subscribing to the new shares using the subscription rights. This could lead to the existence of arbitrage opportunities. In addition, the announcement of these processes incorporates very relevant information to the market, which could generate abnormal returns for the shares. This paper analyses both hypotheses simultaneously on the same sample and concludes that there are indeed arbitrage opportunities and also abnormal returns can be detected. Furthermore, it is also concluded that these effects are especially significant in companies with low liquidity or for which short positions in the market are not allowed.

Suggested Citation

  • Manuel Verdú Henares & Óscar Carchano Alcina & José Emilio Farinós Vinas, 2020. "Arbitrage Opportunities and Event Impacts On Spanish Increase Capitals," MIC 2020: The 20th Management International Conference,, University of Primorska Press.
    • Handle: RePEc:prp:micp20:9-23
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