Seasoned equity offerings: Stock market liquidity and the rights offer paradox

Edith Ginglinger, Laure Koenig-Matsoukis and Fabrice Riva
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Laure Koenig-Matsoukis: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Fabrice Riva: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the impact of market liquidity on seasoned equity offerings (SEO) characteristics in France. We find that, besides blockholders' takeup, liquidity is an important determinant of SEO flotation method choice. We document higher direct equity offering flotation costs, but also improved stock market liquidity after public offerings and standby rights relative to uninsured rights. After controlling for endogeneity in the choice of SEO flotation method, we find that pure public offerings and standby rights are comparable in terms of direct costs and liquidity improvement. Our results provide new insights as to why firms choose public offerings despite apparently higher costs.

Keywords: SEO; Seasoned equity offering; flotation method; flotation costs; rights issues; public offerings; liquidity; bid-ask spread (search for similar items in EconPapers)
Date: 2013-01
Note: View the original document on HAL open archive server: https://hal.science/hal-01483978v1
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Citations: View citations in EconPapers (9)

Published in Journal of Business Finance and Accounting, 2013, 40 (1-2), pp.215-238. ⟨10.1111/jbfa.12007⟩

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Related works:
Journal Article: Seasoned Equity Offerings: Stock Market Liquidity and the Rights Offer Paradox (2013)
Working Paper: Seasoned equity offerings: Stock market liquidity and the rights offer paradox (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01483978

DOI: 10.1111/jbfa.12007

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