 The benefits and costs of deeply-discounted rights issues - practitioners viewpointsBruce Burton, Christine Helliar and David Power Applied Economics Letters, 2004, vol. 11, issue 6, 369-372 Abstract: Deeply-discounted rights issues (DDRIs) remain rare on the world's largest stock markets, but the costs and benefits of such issues have attracted renewed attention in recent years as market regulators search for ways of driving down the cost of external fund raising. The relative scarcity of DDRIs presents a puzzle to researchers because the rationale normally suggested - concern about the diluting effect of a heavily discounted rights issue on earnings per share - is easily shown to be irrelevant in theory (Patterson and Ursel, Journal of Business Finance and Accounting, 20, 115-24, 1993). The present study therefore reports the results of a series of discussions with firms, investors and advisers in the UK regarding DDRIs and the extent to which concerns about the impact on earnings continue to hamper growth in their use. The results suggest that firms are fully aware of the potential cost savings associated with DDRIs, but concerns about investor reaction to any offer-induced earnings dilution continue to mitigate against any significant increase in their popularity. Date: 2004 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:11:y:2004:i:6:p:369-372 Ordering information: This journal article can be ordered from DOI: 10.1080/1350485042000228213 Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
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