 Why are rights offers in Hong Kong so different?Chin-Chong Lee, Wai-Ching Poon and Jothee Sinnakkannu Pacific-Basin Finance Journal, 2014, vol. 26, issue C, 176-197 Abstract: 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 few investment opportunities and firms with 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. Keywords: Rights issues; Private equity placements; Private benefits of control; Agency costs (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:26:y:2014:i:c:p:176-197 DOI: 10.1016/j.pacfin.2013.12.004 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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