Why are rights offers in Hong Kong so different?

Lee, Chin Chong and Poon, Wai Ching and Sinnakkannu, Jothee (2014) Why are rights offers in Hong Kong so different? Pacific Basin Finance Journal, 26. pp. 176-197. ISSN 0927-538X

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Investors react adversely to the announcements of rights offers in Hong Kong and the abnormal return of rights offers on the announcement day is −12.10%. After taking price discounts, underwriting fees and abnormal returns into consideration, the total direct and indirect costs of the seasoned issuers of rights offers are tremendously high. The cross-sectional analysis shows that investors react more adversely to the issuers of rights offers with lower growth prospects, higher free cash flows, larger issue scales, lower pre-issuance stock run up and higher debt capacity. Our empirical result also indicates that cash-rich firms with fewinvestment opportunities and firmswith poor quality in terms of lower market-to-book ratio and larger price discounts choose rights offers over private equity placements. All this evidence supports that agency costs and private benefits of control matter in equity financing.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Law, Arts and Social Sciences > School of Business
Depositing User: Unnamed user with email masilah.mansor@newinti.edu.my
Date Deposited: 12 Apr 2016 09:45
Last Modified: 23 Sep 2016 05:16
URI: http://eprints.intimal.edu.my/id/eprint/167

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