Rights offerings, takeup, renounceability, and underwriting status

Balasingham Balachandran*, Robert Faff, Michael Theobald

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

36 Citations (Scopus)

Abstract

Rights offerings in Australia provide valuable choices to the issuer in terms of both underwriting and renounceability. We formulate a set of hypotheses from a quality-signaling perspective, affording an analysis of the key interrelations between quality, underwriting status, renounceability, takeup, and subscription price discount. We analyse rights offerings from two perspectives: market reaction to rights announcements and identification of the factors driving the choice of issue type. Evidence strongly supports the relation between quality signals and issue type. Using a robustly constructed takeup variable, we establish empirical relations between takeup, underwriting status, and renounceability that differ significantly from those previously reported, but which are consistent with the hypotheses developed in this paper.

Original languageEnglish
Pages (from-to)328-346
Number of pages19
JournalJournal of Financial Economics
Volume89
Issue number2
DOIs
Publication statusPublished - Aug 2008
Externally publishedYes

Fingerprint

Dive into the research topics of 'Rights offerings, takeup, renounceability, and underwriting status'. Together they form a unique fingerprint.

Cite this