Arbitrage Opportunities and Event Impacts On Spanish Increase Capitals

Manuel Verdú Henares, Óscar Carchano Alcina and José Emilio Farinós Vinas
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Manuel Verdú Henares: University of Valencia
Óscar Carchano Alcina: University of Valencia
José Emilio Farinós Vinas: University of Valencia

from University of Primorska Press

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.

Keywords: seasoned equity offering with rights; abnormal returns; opportunity of arbitrage; Spanish stock market (search for similar items in EconPapers)
Date: 2020
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