Rights offerings, trading, and regulation: a global perspective
Theo Vermaelen and
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
We study rights offerings using a sample of 8,238 rights offers announced during 1995-2008 in 69 countries. Although shareholders prefer having the option to trade rights, issuers deliberately restrict tradability in 38% of the offerings. We argue that firms restrict rights trading to avoid the execution risk associated with strict prospectus requirements, a prolonged and uncertain transaction process, and the potentially negative information signaled via the price of traded rights. In line with this argument, we find that issuers restricting tradability are those with more to lose from reduced participation or that are more likely to face execution risk.
Keywords: rights issue; seasoned equity offering; liquidity of rights (search for similar items in EconPapers)
JEL-codes: G14 G32 G38 K22 (search for similar items in EconPapers)
Pages: 63 pages
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Working Paper: Rights offerings, trading, and regulation: A global perspective (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:55403
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