Discount, transparency and announcements effects of equity rights offerings: international evidence

Nils-Christian Bobenhausen () and Astrid Juliane Salzmann ()
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Nils-Christian Bobenhausen: RWTH Aachen University
Astrid Juliane Salzmann: IESEG School of Management, LEM-CNRS UMR 9221

Journal of Business Economics, 2021, vol. 91, issue 5, No 5, 733-758

Abstract: Abstract Equity rights offerings and their respective announcement effects have been studied extensively in the literature. Our study expands upon these studies and focuses on those announcement effects and the relation between the discount of an equity rights offering and the announcement effect. Previous theoretical and empirical analyses show that firms can signal their quality via the discount in an equity rights offering and demonstrate a negative relation between the discount and the announcement effect. We argue that this link is only relevant in environments where signalling is possible and necessary. These are financial markets with a particularly low level of capital market transparency, i.e. high information asymmetry. We calculate announcement effects for an international sample of equity rights offerings and show that the negative effect of the discount on announcement effects can only be observed in environments with a low capital market transparency. Hence, our study estimates announcement effects across several different countries and is thus among the first to analyse signalling considerations for equity rights offerings in different transparency environments.

Keywords: Equity rights offering; Transparency; Discount; Event study (search for similar items in EconPapers)
JEL-codes: G14 G15 G32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11573-020-01023-8

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