The impact of regulation on the seasoned equity offering decision

Adrian Melia, Paul Docherty and Steve Easton
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Adrian Melia: Newcastle Business School, University of Newcastle, Newcastle, NSW, Australia
Paul Docherty: Department of Banking and Finance, Monash University, Melbourne, VIC, Australia
Steve Easton: Newcastle Business School, University of Newcastle, Newcastle, NSW, Australia

Australian Journal of Management, 2020, vol. 45, issue 1, 94-113

Abstract: The rarity of rights issues in the United States makes it difficult to examine the choice between alternative seasoned equity offering (SEO) methods in that market. In Australia, however, both rights issues and private placements are prevalent. We therefore use the Australian market to test whether regulation influences a firm’s choice between rights issues and private placements. When a firm decides to issue seasoned equity in Australia, regulation favours private placements if the issue is small or needs to be completed quickly. Consistent with regulations affecting the choice between SEO types, our empirical results provide evidence that firms in Australia are more likely to choose a private placement for small issues or when taking advantage of temporary periods of overvaluation. JEL Classification: G12, G14

Keywords: Private placement; regulation; rights issue; SEO (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:45:y:2020:i:1:p:94-113

DOI: 10.1177/0312896219833724

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